Exxon Gives SGI's Algae-to-Fuel Effort $600 Million Kick-start

ExxonMobil’s $600 million partnership with Synthetic Genomics to develop next-generation biofuels from photosynthetic algae is already being cast as a shift in the conservative company’s modus operandi.

And why not? The largest U.S. oil company by market value has shied away from investments in alternative energy and has been especially critical of ethanol.

In some ways this represents a huge step for Exxon. The company has spent a meager $1.5 billion in the past five years on energy efficiency and reduction of greenhouse gases compared to its total annual capital spending budget of between $25 billion and $30 billion annually.

But Exxon execs didn’t wake up yesterday and exclaim, ‘heck, algae looks pretty cool, let’s throw a bunch of money at it and see if we discover anything.’

If we know anything about Exxon, they’re a calculating, conservative and profit-driven company, which is why Tuesday’s announcement is important. It means one the world’s largest oil and gas companies sees the potential of a commercially viable algae-to-fuel product.

The SGI-Exxon algae biofuels research program bears significant risk. Emil Jacobs, vice president of research and development at ExxonMobil Research and Engineering Company, said it best in a call with reporters Tuesday morning. “It’s not going to be easy and there are no guarantees of success.”

Still, Exxon spent nearly two years examining “many alternative energy sources and literally all biofuels options” before determining algae met all of the company’s parameters, Jacobs said.

Exxon weighed the technical challenges, environmental performance – such as carbon footprint, land and water use – scalability and economics. In the end, Exxon chose algae in part because it doesn’t require fresh water, uses less land than food-for-fuel products like corn-based ethanol and it consumes carbon dioxide, Jacobs said.

This particular project could allow Exxon to use existing refineries and pipelines, adding to its commercial viability. Finding a biofuel that works existing infrastructure would likely mean faster adoption, Jacobs said.

The research program is unique and well-suited for Exxon because SGI founder and CEO Craig Venter of human genome mapping fame, is working to find or engineer strains of algae that use energy from sunlight to turn carbon dioxide into lipids, or cellular oils. The goal is to develop a highly productive algae strain that secretes lipids, something like a hydrocarbon liquid that can be sent through Exxon’s existing refineries and eventually onto service stations.

This is a departure from more traditional approaches of growing and harvesting algae like a crop, a costly and time-consuming method, said Venter, adding SGI’s advances could change it from a farming process to a bioreactor program.

The SGI-Exxon team is left to solve the big three: finding the most productive strain of algae; creating the best system for growing it; and developing the most-economic method to mass produce it. The R&D project will do this by testing thousands of strains of algae at a greenhouse-type facility in San Diego, Venter said during the call.

Of the $600 million investment to be spent over the next five to six years, $300 million will go directly to SGI and the remaining amount will be used to cover Exxon’s internal costs.

As Venter put it: “There has been a lot of hype and hope over it (algae) than reality.”

But this long-term R&D collaboration – which couples a genome phenom with a major oil company that has production and commericalization expertise  – adds more than a modicum of credibility and potential viability to the algae-to-fuel effort.

See BNET’s additional coverage of the biofuels industry:

• GreenHunter Puts ‘For Sale’ Sign on Biodiesel Refinery
• POET to Use Corn Cobs — Not Natural Gas — to Power Cellulosic Ethanol Plant
• Miracle Biofuel Plant Jatropha Reveal Its Achilles Heel
• Who Will Buy Bankrupt Ethanol Maker Aventine?
• Green Plains, Sunoco Deals Highlight Bargain-Basement Ethanol Plant Prices
• NASA Takes a Crack at Algal Biofuel
• Does Conoco Deserve a Subsidy to Produce Biofuels?
• Biofuel from Water, With Help of Duckweed
• Ethanol Industry Squeezes an Otherwise Profitable Farmer Mac
• Virent Energy, Shell Poised for Second-Gen Biofuels Race
• Does EPA Biofuels Proposal Really threaten Corn-based Ethanol?
• California Kicks Corn-based Ethanol to the Curb, Welcomes Futuristic Biofuels
• Ethanol Plants Idle, Workers Wait as VeraSun Buyout Drags Out
• Oil Refiner Valero Plows More Money into Renewables with Terrabon Investment
• Aventine Files for Bankruptcy; CEO Miller Points to RINs
• Pacific Ethanol’s Troubles Signal More Bankruptcies to Come
• Codexis Deal highlights Shell’s Increasing Interest in Biofuels
• Oil Giants Wade into Renewables Pool

Image of scientist with algae plate from Synthetic Genomics Inc.