May 26, 2009
By Clifford Krauss
For decades, the big oil companies and the farm lobby
have been fighting about ethanol, with the farmers pushing to produce more of
it and the refiners arguing it was a boondoggle that would do little to solve
the country’s energy problems.
So why are technicians for BP, the giant oil company, now working at an
experimental ethanol plant in this old Louisiana oil town, helping to make it
more efficient?
The erstwhile enemies, it turns out, are gradually learning to get
along, as refiners increasingly see a need to get involved in ethanol
production. Ethanol, made chiefly from corn, now represents about 9 percent of
the country’s market for liquid fuels. And the percentage is growing year after
year because of federal mandates. With the nation’s thirst for gasoline, and
the ethanol that is blended into it, expected to revive when the economy does,
the oil companies want to be in a position to take full advantage.
The interest expressed by big oil companies is coming in the nick of
time for small companies that desperately need capital and cannot find it these
days in the private markets. Take the case of Verenium Corporation, a small company based in
Cambridge, Mass., that here in Jennings is testing new forms of biofuels in alliance with BP. Instead of
ethanol made from food crops, the partners are devising a version from grasses
in the sugar cane family.
The experiments here are preparation for building a second, $250 million
plant in Florida with the capacity to produce 36 million gallons a year of new
biofuels — the first commercial plant of its type built with oil company money
and expertise. Verenium scientists have already developed a secret sauce of
enzymes and microbes that ferment and distill biomass into ethanol. Now BP is
contributing technical expertise aimed at getting the temperatures and
pressures in the vats just right.
Commercial success is not assured, of course. But the fact that a major
oil company has even made an alliance to go commercial with Verenium is
considered a breakthrough by many ethanol executives.
“Any time you get Big Oil into the game, that changes the paradigm
because nobody can go large scale chemical engineering like Big Oil,” said
Brent Erickson, an executive vice president of the Biotechnology Industry
Organization, a trade group.
Only two years ago, BP had only a minuscule investment in biofuels. But
since then the company has committed $1.5 billion to various projects. Along
with its work with Verenium, it entered a partnership with a Brazilian concern
last year to produce ethanol from sugar cane.
Lessons learned in Louisiana may eventually help convert Brazilian cane
into more advanced biofuels, researchers say, producing a potentially vast new
reserve for BP.
BP also speaks with optimism about a partnership with DuPont to test
production of biobutanol, an advanced liquid alcohol fuel that is made from the
same feed stocks as
advanced ethanols and is compatible with existing pipelines and car engines. Executives
say they hope to begin making the fuel in large amounts by 2013.
“We can see biofuels as being a really big potential reservoir,” said
Phil New, president of the company’s BP Biofuels unit. “For an energy firm to
get into sugar cane farming is a pretty big move.”
Oil companies are still skeptical about conventional ethanol, especially
the type made from corn, which they say corrodes pipelines and is inefficient.
The plant here is just one sign that the big oil companies are now at
least grudgingly accepting biofuels — particularly those made from wastes and
nonfood sources, which do not bear corn ethanol’s stigma of raising food prices.
The big change came in the 2007 energy law enacted by Congress that set
ambitious mandates for refineries to blend increasing amounts of biofuels over
the years. By 2022 they will be obliged to blend 36 billion gallons of
biofuels, or more than three times current levels.
“If the government is going to make a market happen, we needed to be
able to participate commercially in that market,” Mr. New said.
The oil companies also say that as crude oil becomes ever more difficult
and expensive to find, biofuels can bolster their reserves.
“There will be a need for all these fuels,” said Graeme Sweeney,
executive vice president for future fuels and carbon dioxide at Royal Dutch Shell.
He predicted that the 1 percent of the world’s transportation fuels that are
biofuels today “could easily be 10 percent in the next decade or so.”
Shell was the first of the big oil companies to venture significantly
into the new biofuels, getting its toes wet in 2002 by providing money to a
Canadian company called Iogen Corporation to research making ethanol from plant
waste. Shell would not discuss how much money it is now investing in biofuels,
but said it had quadrupled biofuel research spending since 2007.
Shell has also formed partnerships with a variety of small companies at
work on improving enzymes that break down various plants and waste materials
for ethanol, making fuels from algae and even biogasoline from sugary liquids
derived from plant materials. Chevron has formed a joint venture with Weyerhaeuser to develop
biofuels from wood waste.
And Valero Energy Corporation,
the country’s largest petroleum refiner, has snapped up seven corn ethanol
plants from VeraSun Energy in recent months since VeraSun filed for bankruptcy
protection last fall. Valero has suggested that it could transform the plants
for newer blends of ethanol.
Each initiative is still small compared with the companies’
multibillion-dollar oil exploration and refining budgets, prompting skeptics to
say they are more interested in improving their image than producing clean
fuels.
“If we depend too heavily on the big oil companies to drive the biofuel
agenda,” warned Jeff Broin, chief executive of the ethanol producer Poet,
“we’ll be using large volumes of oil for many, many years to come.”
But taken together, the research projects and deals are a sharp contrast
to the scaled-back oil company projects in other alternative energy sources
like hydrogen and solar. And the support is welcome for small entrepreneurial
companies that are long on new technologies and short on capital.
“With any start-up company, people say ‘Wow, but is it going to
work?’ ” said Randy Cortright, founder and chief technical officer of
Virent Energy Systems. His company wants to make a biogasoline from plant
sugars that is chemically similar to gasoline produced by conventional
petroleum refineries.
He said Shell’s investment raised his company’s credibility with lenders
“by giving their vote of confidence in this technology, spending resources and
providing their own people for development.” Shell also will eventually
distribute the product, he said, “and they already have the infrastructure for
taking the product to the fuel pump so the consumer can use it.”
Arnold R. Klann, chief executive of BlueFire Ethanol, a company that
converts municipal waste into ethanol and is seeking financing to build plants,
said lenders wanted to know that an ethanol company had credible long-term
customers to generate revenues. He said he had draft contracts with two major
oil companies he could not yet identify that wanted to invest in his operations
and use his fuels.
“There is tremendous interest by the oil companies to invest in these
first-of-a-kind projects,” Mr. Klann said. “Where they were initially investing
very tentatively in new technology development, in the last year they have
begun to finally invest in companies that are building commercial production
facilities.”
In Jennings, BP technicians advise Verenium technicians on what types of
metals to use to line their pipes, what kind of valves will last longest and
how to position blades in fermenting tanks to best mix chemicals and feed
stocks. It is all an effort to reduce the price of the product to quickly
compete with conventional ethanol and perhaps, eventually, with gasoline.
“We are the chef, and they are more like the restaurant manager,” said Mark
G. Eichenseer, Verenium’s vice president for operations. “We have the recipes,
and they have the experience and know-how to select the pots and pans.”
Source: http://www.nytimes.com/2009/05/27/business/energy-environment/27biofuels.html