Exxon's Biofuel Bet 34 comments
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By Lara Crigger
Earlier this week, the world's largest oil major announced a five-year, $600 million partnership with Synthetic Genomics Incorporated [SGI], a California-based genetic engineering firm, to develop next-gen transportation fuel-from pond scum.
This algae-based bio-oil would so closely resemble the hydrocarbons in petroleum that it could be processed by refineries, be transported through pipelines and fill up car and airplane gas tanks without any upgrades or replacements needed. Sounds pretty fanciful, eh?
The partnership is an unexpected change of course for Exxon, who, for the past several years, has scoffed both at biofuels and alternative energy in general. After all, it was only two years ago that CEO Rex Tillerson famously accused ethanol of being "moonshine."
So will this new venture-one of the largest Big Oil/Bio Oil team-ups ever-signal a coming of age for the beleaguered biofuel industry? Or will it be subsidized ethanol all over again?
Why Algae?
Even as Tillerson was publicly turning his nose up at biofuels, Exxon (NYSE: XOM) was secretly weighing its options, assessing the scientific challenges and commercial viability of the various technologies on the market.
"It's fair to say that we looked at all the biofuels options," said Dr. Emil Jacobs, VP of R&D at ExxonMobil's Research and Engineering Lab in an interview with the New York Times. "Algae ended up on top."
Currently, most biofuels derive from agricultural crops: Ethanol, for example, is processed from sugarcane or corn, and biodiesel is distilled from plant oils, most commonly soybeans. But hydrocarbons can come from other sources too, like algae, that produce them directly and store them within their bodies as food for hard times. A kind of biological gold-bug mattress-stuffing.
Algae also offer several advantages that agricultural crops can't: They reproduce on their own, they can live in nonarable land and they don't need fresh - or even clean - water to survive. In addition, these single-celled organisms require much less space to grow: Current strains of algae can produce 2,000 gallons of fuel per acre, compared with 250 gallons for corn-based ethanol.
But best of all, the molecular structure of algae oil naturally resembles that of petroleum - not too surprising, considering much of today's crude oil was made by oceanic algae 500 million years ago.
According to the energy research group Carbon Trust, by 2030, algae fuel could sub in for more than 70 billion liters of fossil fuels used each year. That's about 12% of the total jet fuel yearly, or 6% of all auto diesel - an annual saving of over 160 million tons of greenhouse gases.
Until recently, however, the cost and technical challenges behind mass-produced algae oil have been prohibitively large, although as technology advances, the price tag has come down quite a bit. Still, according to the FT, the estimated cost of producing algae-based biofuel stands at $33/gallon - compared with $2/gallon to produce Saudi crude.
Carbon-Chomping Pond Scum
That's where Exxon comes in. Under the partnership, the company is funding a new SGI research lab in San Diego, where the genomics firm can research ways to enhance algae for mass production.
Genetic engineering is key, says J. Craig Venter, co-founder of SGI, and best known as the leader of the team who decoded the human genome. "It's the only way we can change the yield far beyond nature, and make the algae resistant to virus attacks, and so on," he told FT.
Because algae are single-celled organisms, their genetic structures are simpler than those of other biofuel crops (like corn), and are therefore easier to manipulate. That means SGI can custom-build new strains of algae that will secrete refinery-ready oil-and even consume excess carbon dioxide.
These carbon-chomping algae farms could therefore be situated close to existing power plants, using the emissions generated there to feed the hungry pond scum. Exxon could find this carbon recapture system quite handy, should the Waxman-Markey energy bill pass the Senate. Under the bill, Congress would institute a carbon cap-and-trade program, allowing companies to sell credits for any emissions savings they generate on the open market.
Of course, how much carbon could be recaptured in such a project is debatable. Point Carbon senior analyst Greg Singleton told the WSJ that although algae could conceivably reuse up to 40% of a coal-fired power plant's carbon emissions, it would also take a farm about 13.1 square miles across. "On paper it looks attractive," he said, "[but] I haven't seen it done on a large scale."
Big Oil Teams With Bio-Oil
SGI is no newbie to Big Oil partnerships, as the firm has already signed up with BP (NYSE: BP) to develop coal-eating algae. And several other Big Oil/Bio Oil joint ventures are in the works.
In June, Algenol Biofuels partnered with Dow Chemical (NYSE: DOW) to construct a $50 million test algae fuel farm. And the firm also signed an $850 million licensing agreement with Sonora Fields to develop a Mexican algae farm that, when viable, could produce up to a billion gallons of fuel annually.
But it hasn't been all green shoots for algae oil. Take GreenFuel Technologies, who, after scoring several major investors and a $92 million algae farm in Spain, ended up shuttering its doors earlier this year.
The difference now, says Venter, is Big Oil's involvement. "This would not happen without the oil industry stepping up and taking part," he told The Guardian.
From Exxon's perspective, it has little to lose. Over the years, the oil giant has felt increasing pressure from its shareholders to explore alternative energy sources, and politicians have not only passed new alt-energy tax breaks and incentives, but are mulling new tax hikes for oil refiners and drillers.
Besides, $600 million is a drop in the bucket for the world's largest publicly traded oil company. It barely registers next to the $29 billion Exxon will shell out this year to find new sources of crude oil and natural gas, and the amount seems even less when compared with Exxon's record $45 billion profit in 2008.
Although Exxon is prepared to drop billions more if SGI finds a way to generate low-cost, commercially viable algae oil, pond scum pumps at the corner gas station are still several years away.
"We need to be realistic," said Dr. Jacobs on a conference call. "This is not going to be easy, and there are no guarantees of success."
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This article has 34 comments:
Right at and immediately after Exxon Valdez spill in Alaska the petroleum industry began earnestly searching for alternative means of oil spill response. The old model of scrubbing oil mechanically off birds, waves, rocks and beaches no longer worked as a practical matter.
Bio-remediation came into being, where we learned how to harvest and keep happy certain strains of bacteria that would eat fuel as a food source. The technique has come a long way in 15 years.
Using bacteria as a FUEL itself, is the next logical step in our efforts to understand and better live within the Carbon and Nitrogen cycles. For far too long our society has made our living on just one or two areas of the carbon and nitrogen cycles.
Learning to match our behavior, fuel and energy uses synergistically with our bacteria friends will continue to yield ever increasing benefits.
33 $/bbl is not bad compared to 38 $/bbl for coal-derived syncrude using 2-stage hydroliquefaction.
> jack
On Jul 17 09:59 AM CoinMiner wrote:
> Right at and immediately after Exxon Valdez spill in Alaska the petroleum
> industry began earnestly searching for alternative means of oil spill
> response. The old model of scrubbing oil mechanically off birds,
> waves, rocks and beaches no longer worked as a practical matter.
Many people believe that the carbon in fossil fuels are the cause of global warming. If sunlight is being used to sequester existing atmospheric CO2 into algea, and re-released during combustion, then it is a zero-sum cycle. In essence, the energy is all solar, since sunlight powers the photosynthetic sequestration.
But until algea petroleum is scaleable worldwide and financially comparable, it is no more earthchanging than BP going into solar panels... how'd that go again?
Is that per year?
>After all, it was only two years ago that CEO Rex Tillerson famously accused ethanol of being "moonshine."
Rex Tillerson was correct because Exxon engages in what makes economic sense instead of pandering to PC.
On Jul 17 10:13 AM louis Hemmings wrote:
> in many articles on biofuels why is there no mention of jatropha?
> has the article author not heard about it?
I finished reading this article and went to the news to see what has been happening in the world. This jumped right out at me.
news.yahoo.com/s/time/...
Known species? Unusual, but natural? Probably. This time.
On Jul 17 10:06 AM john s. gordon wrote:
> i think the author means 33 $/barrel.
>
> 33 $/bbl is not bad compared to 38 $/bbl for coal-derived syncrude
> using 2-stage hydroliquefaction.
Worth a chuckle - EATR creators: Our robots won't eat corpses
news.cnet.com/8301-178...
On Jul 18 05:29 PM vpratt51 wrote:
> First let me say that I love science and have faith in it's ability
> to meet almost all challenges, including our carbon predicament.
> When I hear about advances in algae farming, I can't help recalling
> a science fiction novel from the sixties. It deals with greed, power,
> and the role of the media. A subplot of the story, which is set approximately
> in current time, is about a large, matted mass of man- made algae
> that has gone "berserk" and is destroying areas of the sea. Funny,
> entertaining, thought provoking. For now, I will give the world's
> most powerful the benefit of the doubt and assume that they are using
> safeguards and sound measures to make sure there will be no accidents.
> I hope they realize that they are dealing with something a little
> livelier than fossils.
>
> I finished reading this article and went to the news to see what
> has been happening in the world. This jumped right out at me.
>
> news.yahoo.com/s/time/...
>
> Known species? Unusual, but natural? Probably. This time.
" this won't be easy & there's no guarantee of success"
says a lot. Has anyone given thought to the time frame it will take to develop this to any level of significance, say more than 8 - 10 % of the
total usage in this country. Also the end cost to the consumer. I feel although this quest along with other alternative means of energy are
necessary for the distant future the real impact over the next 20 to 40 years is still a large question.
XM has waited too long and is trying to salvage whatever it can of its petroleum based butt. Algae oil, as can all plant lipids, be used directly in diesel engines with no modification whatever. The first internal combustion engines were designed to run on biofuels, gasoline had not been invented yet---there is no need for gasoline when there are no engines to run on it. The first engine that Rudolf Diesel built in 1893 ran on peanut oil.
In order to be made into a fuel, plant lipids(vegetable oils, algae is just one of many) are given a process called transesterification. This removes the long chain hydrocarbons that cause gelling at lower temperatures. Higher value oil components such as glycerol are also removed. Glycerol is a base ingredient in thousands of products from lipstick to dynamite, and has a higher value than fuel oil. Transesterification is a simple process similar to soap making that requires no complex equipment and only fundamental knowledge and skill. People have been making fuel from salvaged cooking oil in garages and backyards for 40 years. Hippies and self sufficiency types who read Mother Earth News magazine in the late 60s and 70s got all the skill needed to run diesel trucks, buses and cars on backyard diesel fuel made from salvaged cooking oil. There are several videos on You Tube made by people doing it now.
--------"The partnership is an unexpected change of course for Exxon, who, for the past several years, has scoffed both at biofuels and alternative energy in general. After all, it was only two years ago that CEO Rex Tillerson famously accused ethanol of being "moonshine."-----------
Why not? They(Big Oil) have been trying to discredit "moonshine"(which is exactly what it is---ethanol is the alcohol in any alcoholic beverage) for over 100 years. The first Model T that Henry Ford built in 1908 was designed to run on ethanol. Ethanol burns clean, almost 0 emissions, has a higher flash point than gasoline, fires can be put out with plain water, is safe enough that people happily drink it every day, and hospitals require it to be used as a routine disinfecting hand wash.
And it is a better fuel than petroleum. Ethanol has an octane rating of 115~120 vs. 85-87 for regular gasoline. This means that ethanol has a much higher resistance to pre ignition(engine knock) when used in internal combustion engines. With ethanol tuned engines, you can achieve compression ratios of 18~24:1 vs. 9~10:1 with gasoline. The higher the compression ratio, the higher the thermal efficiency of internal combustion engines. Thermal efficiency is the amount of potential chemical energy(BTUs) in the fuel put in that you get back as work. The thermal efficiency of gasoline engines is around 20%----with dedicated ethanol engines, it can be around 45%. This is not new or untried technology. Indy League Circuit Racing has used nothing but alcohol based fuels for over 40 years because it is a superior fuel. The typical Indy race car develops about 1200-1600 hp from a 3L Honda V8 engine(about the same size or smaller than most vehicles on the road today)----and roughly the same power output as 3-4 18 wheel, over the road, diesel rigs. You couldn't build engines like that using gasoline, they'd blow up.
And ethanol is a finished product---it requires no refining.
We've already past Peak Oil---the proof is Canadian Tar Sands, less than 20 years ago considered far too expensive and environmentally damaging to bother with----even by XM. Now, being exploited as fast as they can. Oil is running out. And it will only continue to become harder to get.
total usage in this country."---------
That depends entirely on how much we wish to invest in the effort.
During WW2, after the loss of North Africa, and the bombing of Ploesti by Allies, Germany supplied all of its fuel using Fischer-Tropsch process. Fischer-Tropsch can produce alcohols(methanol and ethanol) and long chain hydrocarbons(diesel) or anything in between by adjusting temperature, pressure and catalyst beds. Germany powered everything from submarines, panzer tanks, V1 and V2 rocket even the Me-262 Swallow, the world's first operational jet fighter with fuels made using Fisher-Tropsch process. Range Fuels is just now finishing buildng a plant in Soperton GA that will produce 100 million gal/yr of ethanol from wood logging and millwork waste. It should commence operation late this year or early 2010. The Soperton plant
Chemrec is a Swedish company that specializes in converting pulp mills to make ethanol from "black liquor"---a by product of pulp and paper making. There is a potential to produce a minimum of 4 billion gallons/yr of ethanol by converting black liquor to ethanol. This was a common source of ethanol prior to WW1 in both Germany and the US.
PetroSun commenced operation in April 2008 on a 1200 acre open pond algae farm in Rio Hondo TX. The farm is scheduled to produce 4.4 million gallons/yr of algae oil when full production is reached. PetroSun is also actively leasing defunct cat fish farms all along the Gulf Coast to expand their capacity.
Valcent is just now finishing up installing demonstration size installation of their technology to grow algae in closed loop systems. This is similar to an aquarium, only optimized to grow algae instead of fish. The Valcent system is computerized, uses almost no water after set up, is modular for reliability and add on expansion capability, and can be installed in any climate and operated year round.
On Jul 18 10:22 AM thesheet wrote:
> ......................... strains of algae can produce 2,000 gallons
> of fuel per acre, compared with 250 gallons for corn-based ethanol".
>
>
> Is that per year?
On Jul 18 08:03 PM Nate dP wrote:
> Uh John S Gordon? That's 33$/GALLON not per BARREL.
On Jul 19 10:38 AM jkmac wrote:
> I feel the last comment of the article,
> " this won't be easy & there's no guarantee of success"
> says a lot. Has anyone given thought to the time frame it will
> take to develop this to any level of significance, say more than
> 8 - 10 % of the
> total usage in this country. Also the end cost to the consumer.
> I feel although this quest along with other alternative means of
> energy are
> necessary for the distant future the real impact over the next 20
> to 40 years is still a large question.
Where did you get that number?
------" But what *was* a typo was the estimated cost of producing Saudi crude: That should be $2/BARREL, not $2/gallon"----------
So where is the other $60 something going?
NREL achieved production rates of around 3,000/acre in field trials in New Mexico in the early 1990s---and concluded that production rates would be much higher in warmer climatic conditions.
PetroSun estimates their Rio Hondo facility to produce 4.4 million gallons on 1180 acres of ponds. That is 3729 gallons per acre. In the last year, it would make $145.2 million dollars worth of algae oil. They would have to store a LOT of oil, or else make a lot of money at $33 a gallon. Even selling it at about $7 a gallon as cooking oil(algae oil can also be used for cooking), they'd make $30.8 million dollars.
As for your other question, I don't know the exact details of how that cost breaks down.
On Jul 20 12:10 PM Fred Linn wrote:
> --------"Yes, it costs $33/gallon to produce algae fuel."--------
>
>
> Where did you get that number?
On Jul 20 08:01 AM Lara Crigger wrote:
> Yes, it costs $33/gallon to produce algae fuel. But what *was* a
> typo was the estimated cost of producing Saudi crude: That should
> be $2/BARREL, not $2/gallon.That just goes to show just how wide
> the gulf is between these two production costs.
Over a year ago I read that the U.S. Defense Department estimated that the American taxpayer spent over $100 a barrel for all the military costs to guard the world's oil shipping lanes, oil loading and off-loading sites and some refineries, pipe lines and oil fields, especially in the middle east and north Africa. This is one of the reasons that the U.S. military is very keen on promoting biofuel develop in the U.S. Energy independence for the U.S. and fewer reasons to get stuck in wars far from its shores.
A vague, uncredited, hearsay statement. Not even any mention of who made this "suggestion".
That is not a reliable source at all.
I find no mention at all for the $2 bbl oil production cost. I very much doubt that also. It costs much more than that to produce oil from Canadian tar sands----but there have been no announcements that tar sand strip mines are being shut down---on the contrary, plans to expand strip mining seems to still be in full swing.
As for your other point, here's more information behind the $33/gallon figure: www.greentechmedia.com.../
From that link:
"Algae biofuel startup Solix, for instance, can produce biofuel from algae right now, but it costs about $32.81 a gallon, said Bryan Wilson, a co-founder of the company and a professor at Colorado State University. The production cost is high because of the energy required to circulate gases and other materials inside the photo bioreactors where the algae grow."
Hope that clears things up a bit.
On Jul 20 03:12 PM Fred Linn wrote:
> from the Financial Times article-------"One recent estimate suggested
> that biofuels currently produced from algae cost about $33 per gallon."-------------
>
>
> A vague, uncredited, hearsay statement. Not even any mention
> of who made this "suggestion".
>
> That is not a reliable source at all.
>
> I find no mention at all for the $2 bbl oil production cost.
> I very much doubt that also. It costs much more than that to
> produce oil from Canadian tar sands----but there have been no announcements
> that tar sand strip mines are being shut down---on the contrary,
> plans to expand strip mining seems to still be in full swing.
We already know that it is economically viable to grow corn. The average yield for corn now is about $3.50---let's put some padding on that so we can be sure if our numbers are not right, they will be on the profitable side. We'll make corn $5.00 per bushel.
140 X 5 = $700 gross per acre growing corn.
NREL has already shown 3,000 gal/acre yield with open pond systems. PetroSun's operation gives numbers that say it is producing 3700 gal/acre. Let's say that they are both wildly exagerated and the actual production is only 1/2 or less, let's say 1500 gallons per acre. Even if PetroSun sells its algae oil for only $1 per gallon, that means that
1500 X $1 = $1500 /acre gross.
The gross return on algae oil is over twice as much as economically viable corn.
Now let's look at what we need to grow algae vs. corn. You don't need tractors or plows---there is nothing to plow, algae grows in water. No plow---means no disk or harrow needed. Algae is simply siened or filtered from the water---no harvesters needed. Since there are no fields, you simply add fertilizer to the water, or else use water that already has fertilizer in it---for instance sewage water, or field run off from containment ponds---commercial fertilizer may not even be needed. Therefore, you don't need field applicators either.
I seems to me that if we can grow corn and show a profit, we can grow algae and show a profit. Even at $1.00 per gallon. Diesel is now selling for about $2.50/gal. at the pump---and algae oil needs no refining.
Sorry that got omitted.
Based on my data, which I googled. It would take 73 million acres to completely replace the United States gasoline consumption with algae-based bio-oil.
Not counting any (if) refining losses.
thesheet
On Jul 20 07:59 AM Lara Crigger wrote:
> Yes, per year.