Chevron will acquire Renewable Energy Group (REG) in a $3.15 billion transaction meant to build the US supermajor’s access to the biodiesel market.

REG will provide Chevron access to the biodiesel market and network it has developed throughout its more than 25 years in the sector.

“To be completely blunt, we don’t have expertise in this area,” Chevron chief executive Mike Wirth said in a presentation to investors after the announcement.

He said REG will connect the company to a value chain it does not completely understand.

Chevron will acquire all outstanding shares of REG in an all-cash transaction at $61.50 per share, and REG’s chief executive CJ Warner will join Chevron’s board.

Investment bank Cowen said the cost of the transaction was about 60% higher than what it would be for Chevron to build a biofuels plant, but the acquisition brings Chevron more in line with downstream peers and gives Chevron access to REG's feedstock relationships.

The move comes off the back of definitive agreements made last week between Chevron and Bunge, an agribusiness company with soybean processing plants, to create a joint venture that will use Bunge’s products as a feedstock for Chevron’s low-carbon fuels.

Bunge will operate its oilseed processing facilities and Chevron will have purchase rights for the oil.

These partnerships are intended to progress Chevron’s goal of growing its renewable fuels production capacity to 100,000 barrels per day by 2030.

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