Exxon: A Biofuel Bet?

July 16, 2009


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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