Will Big Oil Become Big Algae? ExxonMobil and Chevron Invest in Synthetic Biology

Filed under: Biofuels | |

Guest Post by Ben Blank, Research Analyst II at KLD and Research Manager for KLD’s Global Climate 100 Index (FTSE KLD GC100)

On August 11, the Financial Times reported on the promise of “synthetic biology,” including the development of algae that generates biofuels. In July, ExxonMobil entered into a $600 million venture with Synthetic Genomics, a firm founded by biotech pioneer Dr. Craig Venter. “Synthetic Genomics has already engineered strains of algae that secrete oil from their cells,” writes the FT’s Clive Cookson.

Will oil companies transform themselves into algae companies? Or, a few years from now, could the makers of “Who Killed the Electric Car?” film a sequel about algae?

The Most Promising Biofuel

Algae is a photosynthetic organism, which typically survives under water in much the same way that plants survive on land–by consuming carbon dioxide and sunlight and expelling oxygen. One of the fastest-growing organisms on earth, algae presents remarkable potential as a replacement for fossil fuels. Most notably, it consumes CO2 while it grows and can produce oil that can be burned in ordinary diesel engines.

Algae also has distinct advantages over other biofuels. First, the US Department of Energy reports that algae yields 30 times more energy per acre than land crops. Second, since it can grow in saltwater, and can even be grown vertically, it does not compete with food crops for arable land, unlike ethanol from corn, sugarcane, and soybeans. Third, algae growth does not demand limited resources, like soil or potable water.

As of today, algae’s only disadvantages are its cost and suitability for large-scale, industrial use. There are several industry organizations devoted to reducing these disadvantages, such as the Algal Biomass Association. Many small biotech startups are also seeking ways to lower cost.

Algae for Airliners and Power Plants

Though algae has been studied as an energy source for over 35 years, interest has taken off recently – led by the aviation sector. After the world’s first biofuels test flight in February 2008, in which Virgin Airlines used a blend of 20% babassu and coconut oil, the airline industry has committed to algae. By early 2009, Continental Airlines and KLM-Air France had operated test flights using 50% algae-blend biofuels. KLM ambitiously plans to fuel 50 of its planes with algae by 2010, and Lufthansa plans to fuel at least 5% of its planes with biofuels by 2020. Aerospace giant Boeing founded the Algal Biomass Organization, which is chaired by Boeing executive Billy Glover.

Algae could also help reduce CO2 emissions by power plants. Utilizing technology created by GreenFuel Technologies, an MIT-based firm, Arizona Public Service has experimented with this since 2006. Algae flourishes when fed CO2 from a power plant’s exhaust stack.

A number of firms are researching algae for automotive use. Solazyme, a California-based startup, uses yeast and fermentation to grow its algae. Solazyme is working with Chevron, the second largest oil producer in the United States. Sapphire Energy, a company funded by Bill Gates’ investment firm, also plans to turn algae into automobile fuel. And as mentioned above, ExxonMobil has entered into a joint venture with Synthetic Genomics.

“Green Company of the Year”

In August 2009, Forbes magazine awarded ExxonMobil its “Green Company of the Year” award, but that was primarily for its interest in liquefied natural gas (LNG). In a gushing article mostly focused on Qatari gas fields, the magazine described ExxonMobil’s algae investment as a “purely political” step to “buy some peace with environmentalists.”

Perhaps. It’s also possible that oil companies could be purchasing algae-related patents to suppress their application. “Who Killed the Electric Car?” provides an example of how a large corporation could squash technology that it perceives as a threat. In the 1990s, General Motors developed an electric car, but refused to widely market the product despite heavy demand. The company cited high production costs as the reason for discontinuing its EV1, before literally crushing the vehicles.

Today, a post-bankruptcy GM is betting its future on the electric car. There is evidence that ExxonMobil may also be sincere in preparing for a post-petroleum future. In a 2008 KLD Blog article, Alan Petrillo noted that ExxonMobil has sharply reduced its spending on oil exploration. Forbes says plainly that the firm “is running out of oil.”

As states control more and more of the world’s oil fields, ExxonMobil may be buying algae to protect itself as a refiner and marketer. Forbes emphasizes ExxonMobil’s good relations with its Qatari LNG partners, but no major oil firm can rely on only one source. By working with Craig Venter, Exxon Mobil could reduce its dependency on the Hugo Chavezes of the world.

Still, as the firm whose name is forever attached to Valdez, ExxonMobil will always inspire suspicion from some observers, who fear we may someday ask: “Who Killed the Algae?”

Copyright ©2009 KLD Research & Analytics, Inc. Reprinted with permission.

© 2009, Ben_Blank. All rights reserved. Do not republish.

Shortlink:

Protected by Copyscape Duplicate Content Finder
Posted by Filed under Biofuels. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry
Line Break

Author: Ben_Blank (1 Articles)

Ben Blank is a Research Analyst II at KLD, covering the ESG impact of American and European companies in the Utilities sector. Ben is also Research Manager for KLD's Global Climate 100 Index (FTSE KLD GC100), which seeks to hold companies that demonstrate leadership in combating climate change. The GC100 supports $160 million under management in Asia, Europe, and the Americas.