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Royal Dutch Shell Plc .com: New green firm may be ripe for oil company takeover

By: TERRY MACALISTER, The Guardian – United Kingdom
Published: Jul 06, 2006

D1 Oils, the start-up company hoping to develop biodiesel from the jatropha plant, is in takeover talks – the latest signal that alternative energy has become a sought-after sector.

Shares in the company rose 10% to 304p yesterday – on top of a 7% increase the day before – amid speculation that a large oil company had declared its interest in the firm.

A formal statement from D1 said talks were at a “very preliminary” stage and could lead to an an unnamed suitor making an offer for – or taking a major shareholding in – the London-based group.

D1 listed on the junior stock market a little over 18 months ago at a price of 160p and in December called off its own takeover talks with its struggling rival Biofuels.

The chairman of D1 is a former dot.com entrepreneur, Karl Watkin, who organised the recent demonstration in support of three NatWest bankers fighting extradition to America.

D1 came to prominence when it signed an innovative deal to create biodiesel for the world’s biggest crude oil exporter, Saudi Arabia. Since then it been building a series of four small refineries in Middlesbrough and hopes to have 32,000 tonnes of capacity onstream by the end of September. A further five are already planned. They will be all be fed by 42,000 hectares of jatropha plants under cultivation in Africa, India and south-east Asia. The company has virtually no revenues yet but a considerable cost base, making it a speculative investment.

“It could be a major oil company or it could be a technology firm that it in talks with D1, but either way this is a business that is very hard to value and is exposed to risks at almost every level,” said one analyst who covers the sector.

Both the country’s largest oil companies, BP and Shell, have been pressing ahead with various kinds of biodiesel projects, spurred on by European Community demands that 5% of all vehicle fuel should come from carbon-free sources.

BP has joined forces with one of Europe’s biggest food groups to build what they claim will be Britain’s largest green petrol plant. BP, Associated British Foods and the US chemical group Du Pont say the biobutanol facility at Wissington, Norfolk, will help use up agricultural surpluses and prepare for government-imposed targets on greener fuels.

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