BP, Verenium Partnership: Big Oil and Alt Energy Find Common Ground

Obviously this is not as simple as if you can't beat them join them - or if you can't beat them, buy them - as Verenium (VRNM) and alternative energy in general is clearly still the alternative energy to oil and other fossil fuels. And clearly VRNM was in need of an investment, but British Petroleum's (BP) recent partnership and investment in VRNM is, I believe, a sign of things to come.

This is certainly not the first time a traditional energy company has ventured into alternative fuels. BP is in fact quite diversified in their energy interests. From all the advertising out there by companies like Exxon (XOM) and Shell (RDS.A), they would have us believe that they are well diversified as well and constantly exploring alternative energy solutions. Whether these are pursued through their own interests or through partnerships with other companies remains to be seen, but the BP partnership with VRNM is an early indication/admission that these oil stalwarts have a lot to learn and gain from partnering with these smaller, more agile companies that have earnetstly focused all of their R&D interests in these areas.

Also considering that the profit margins of oil are subject to vast geo-political considerations, BP and other big oil companies' investment in alternative energy is itself a hedge. They are in effect not simply diversifying, but ensuring that they are a leader in the energy sector for the foreseeable future. Yes, indeed, biofuels are now widely recognized as part of the foreseeable future. What began as merely a 10% additive in gasoline will likely increase to become a replacement.

But I am not going to get into the details of biofuels or energy diversification here. There are plenty of great articles out there on the subject and I am sure others will post relevant links, research, and correct any mistakes I have posted, as they always do.

The point I want to stress here is that there are many companies like VRNM out there that are only a partnership away from becoming part of the future energy solution. I suppose that it could be said about any company that it is a partnership away from success, so let me stress that we are talking specifically about the opportunities for alternative energy companies amidst this global energy crisis. This is not a crisis in software solutions or dry cleaning, but an industry that literally runs every other industry. So the handful of small R&D companies out there that offer viable energy solutions are very likely to attract the interest of companies like BP or GE (GE).

I am looking into other such companies like SatCon (SATC) and Beacon Pwer (BCON). I am sure there are many more out there, and I am sure that with the BP announcement yesterday their competitors are feeling like they have some catching up to do. And so the love affair between big oil and alternative energy begins...

Disclosure: Author holds long positions in VRNM, SATC and BCON

Comments

[jjason:]

Help to bring down the price of oil. Go To:

www.stopoilspeculation.../

And sign the petition.

2008 Aug 08 08:16 AM