By Ron Bousso
LONDON (Reuters) -European refiner and trader Varo Energy is acquiring biogas supplier Renewable Energy Services (RES), its second deal this year in a sector which is expected to grow rapidly as economies seek to reduce carbon emissions.
Varo, owned by Carlyle and energy trader Vitol, said on Thursday the RES acquisition would add 1 terawatt-hours of biogas trading capacity, the equivalent to the greenhouse gas emissions of 100,000 homes in Europe.
In January, Varo bought an 80% stake in Dutch biogas maker Bio Energy Coevorden BV (BEC) with a view to doubling its biogas capacity by 2026.
RES operates in 10 countries and sources the biogas from producers around the world.
"Everything that we're doing is actually about how do we create the scale in the business," Varo Chief Executive Officer Dev Sanyal told Reuters.
Biogas is captured from organic waste in landfills or farms and can substitute fossil-fuel natural gas, resulting in a lower carbon footprint.
Varo, which owns oil refineries, storage and is one of Europe's largest oil and biofuel traders, expects demand for biogas in Europe to increase three-fold by 2030.
Varo is buying 100% of RES for an undisclosed sum. The deal is expected to close in the third quarter of the year.
Interest in biogas has risen significantly in recent years, with several oil firms moving into the sector, including multibillion-dollar acquisitions by BP (LON:BP) and Chevron (NYSE:CVX), as the sector hunts for non-fossil fuel feedstocks for fuel production, power generation or heating.
In July, Varo said it would invest around $3.5 billion until 2026, with two-thirds of the money going to its sustainable energies business, while around $140 million per year would sustain capital expenditure in hydrocarbons.