Sep
28
Nails For the OPEC Coffin
September 28, 2009 | 8 Comments
LS9 has raised $25 million to help further test and scale up its technology for making diesel equivalent from designer microbes and sugar to help further test and scale up its technology. This financing round includes a major oil company, Chevron as well as the venture firms of Khosla Ventures and Lightspeed Venture Partners.
Chevron’s investment comes amid a surprising new flow of funds from independent large oil companies into biofuels. In August, BP signed a $10 million deal with algae specialist Market Biosciences to study how to grow algae through fermentation and last year put $90 million into ethanol specialist Verenium. In July, ExxonMobil announced a $300 million deal with Synthetic Genomics that may grow or expand to $600 million.
Chevron seems to be casting the fastest growing net with an investment in Codexis, another biofuel maker with a designer bug, and has formed a joint venture with lumber giant Weyerhauser in February 2008 called Catchlight Energy for biofuels. Some earlier investments are getting closer to returns, the R&D deal with Solazyme, has progressed to signing a contract with the U.S. Navy to deliver 20,000 gallons of renewable test diesel.
“Big Oil” haters are in for “crow main course dinners” over the coming years. If anyone thinks that Big Oil exists only to disfigure the earth for profit, the record is getting clearer that much of the oil industry is loyal to its market over any particular raw material source. According to one former oil executive turned to a prominent biofuel CEO, Shell Oil alone has over 70 research alliances in biofuels. There are getting to be a lot of potentially fruitful technologies in research and development.
What the long story is telling us is that the wide array of ideas is getting funds with two obvious goals from the Big Oil funding. The new fuel products need to fit the existing fleet of users and must be economical at scales meaningful to the market. Most people don’t grasp the scale of fuel use – 18 million barrels of crude oil in the U.S. – just a single day’s use, is a very big tank.
That makes the oil industry’s quiet but diligent interest and money so noteworthy. A new technology that could go to commercial scale is going to need serious capital, management and engineering prowess to begin – and those kinds of investments are going to be sure things before any capital investment money is spent. That’s why the Chevron share in the LS9 funding round matters – it’s a significant step with significant potential. Chevron isn’t going to spend a part of the $25 million for a PR stunt.
LS9 Technology Diagram. Click image for the largest view.
LS9’s Haywood explains LS9 combines traditional microbiology with synthetic biology. The LS9 scientists have engineered a strain of E. coli bacteria with a genome that can convert sugars into a fatty acid methyl ester, which is chemically equivalent to California Clean diesel.
The traditional microbiology part of the equation is to convert sugar into other materials via fermentation; the synthetic biology part is having a designer strain of E. coli that commits an unnatural act: the LS9 process does not have to kill its microbes to get the oil. The bacteria secrete it naturally and then can live to feed, digest and excrete more drops of oil. Thus the microbe is in continuous production instead of cultivating a new generation for each drop of oil. How much this production process saves in time and costs isn’t something to quantify in general, but the process stream may well be continuous of some type rather than batch, the oil and the growth medium will be mixed rather than the oil trapped inside the body of the organisms, and the separation may well be vastly simplified.
Haywood says, “The basic science is done. We are now working on the yield and scaling factors.” That’s significant, yet the yield matter may or not be commercial today and will always be subject to improvement. The new investment information suggests that the yield is good enough, or close or has a known pathway to a workable improvement.
What’s missing in the news items is the source of the organism’s food sugars. Just how variable a diet and the yield results from the workable sugar sources is important information. Sites for a facility would need a steady diet of some form of plant sugars.
LS9 has a similar microbe that can make fatty alcohols. In May, the company announced an alliance with Proctor and Gamble to try to turn these byproducts into green versions of the surfactants P&G consumes now. Haywood said, “The core [genetic] pathway is 90 percent common. We can make a rich tapestry of products.”
“Forging new nails” isn’t a simple thing if the metaphor applies to liquid fuels. But the LS9 news that smart, due diligent backed money is flowing into the yield and scaling development is heartening for many and for others a sign of a coming disaster.
But OPEC isn’t full of doddering minds. Some have said in effect the effort to go to renewable fuels is a futile effort, a sort of discouragement in the current market situation. Some in OPEC realize what most in the press and public miss – big oil is going for sustainable production at the lowest possible cost – to maximize the value and profit of the shareholders. A bio production process that uses endlessly renewable sources of raw material is far preferable to an endless series of ever increasingly expensive fossil oil sources – if the science and engineering can only get there.
Consumers can relax a wee bit. For all the contempt the oil business receives, the oil business knows better than anyone, that energy is the current squeeze point for a growing economy. New solutions that increase supply might establish a ceiling for fossil oil prices, which over time could come down.
That would put OPEC in a new position, rather than gathering to restrict supply their self-interests will demand that OPEC members seek a safe profitable market share they can hold for the longest possible time. The fight at OPEC won’t be for a higher price, it will be to keep an income from a market share at all.
It only takes 375 100,000-barrel bioprocess facilities across the globe to equal or displace all of OPEC’s production. The undertaker is measuring the cost to lift a barrel country by country looking for his first coffin buyer.
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“If anyone thinks that Big Oil exists only to disfigure the earth for profit, the record is getting clearer that much of the oil industry is loyal to its market over any particular raw material source.”
These words are so true. To survive, they know that they cannot just keep pumping oil from the ground, but have to find other ways of creating oil. The middle east will one day wake up and wonder what happened to all their wealth. By then it will be to late. Hopefully, that day will not be too far away in the near future.
OPEC threw out big oil and nationalised most of their fields. Russia, Venezuela, Bolivia, all of the third world dictators wanted all the loot, not just part.
But big international oil companies have other choices, and they’re going deep under the ocean, they’re going to GTL, CTL, BTL, and they’re going to oil sands and oil shale when given a chance.
LS9 seems to be a good company, but it is just one of a legion of biomass to liquid fuels companies that intends to push oil back into a much smaller niche of consumer products.
In other words, peak oil comes when oil is no longer in demand. Besides political peak oil, of course, which comes whenever (and as frequently) politicians say it comes.
Serious challenge to oil shall come from coal in situ gasification-oil or thermal-catalytic conversion of biomass. The latter shall also require development of biomass farming for energy. If attempts ate started now, we can manage it by the time of peak oil.
I’m sure OPEC countries are shaking in their boots – if this stuff ever works it will help them as well as oil winds down.
The chances of LS9 being successful are probably 1 in a million – if even that good.
Very interesting site. Hope it will always be alive!,
Thanks for some quality points there. I am kind of new to online , so I printed this off to put in my file, any better way to go about keeping track of it then printing?
@ physiotherapy – Spammer! Not a nice person at all to have to sneak your cheap ads in sites others pay for!
Thank you a lot for sharing this with all people you really know what
you’re speaking approximately! Bookmarked. Kindly also visit my website =). We could have a hyperlink exchange arrangement among us