Exxon Mobil, the world’s largest oil and gas company, is dipping its toe in the clean tech sector with a $600 million investment to develop algae-based biofuel as part of its newly formed partnership with Synthetic Genomics, a research and development company launched by J. Craig Venter, the scientist known for decoding the human genome in the 1990s.
Unlike many of its competitors, over the past years Exxon has largely stayed away from the green sector, as its advocated that over the long run fossil fuels are the only viable energy source that will be able to meet rising global energy demand. But back in the 1970′s and 80′s Exxon was involved in Solar research. Here’s a list of their solar patents that tells part of the oil major’s clean tech story.
The company’s venture with Synthetic Genomics comes despite its very public doubts that biofuels even work. Exxon CEO Rex Tillerson called ethanol “moonshine.” With this investment the Texas company is putting its skepticism aside. As part of this venture it plans to invest an initial $300 million with Synthetic for research and development; and, if certain milestones are met, another $300 million.
“We literally looked at every option we could think of, with several key parameters in mind,” Emil Jacobs, vice president for research and development at Exxon’s research and engineering unit, told The New York Times. “Scale was the first. For transportation fuels, if you can’t see whether you can scale a technology up, then you have to question whether you need to be involved at all.”
Scale is probably the major challenge faced by developers of algae-based biofuels. While a number of startups have successfully produced strains of energy-rich algae in the confines of labs, so far, none have been able to scale production to commercial levels. Back in June, GreenFuel Technologies, an extremely well-funded developer in Cambridge, Mass., shut down because it was unable to control and manage its algae production process.
Exxon predicts algae could produce more than 2,000 gallons of fuel per acre of production each year, compared with 650 gallons for palm trees and 450 gallons for sugar cane. Corn yields just 250 gallons per acre a year.
Exxon’s biofuel investment remains quite modest compared to what it invests every year in its oil and gas business. In 2009 the company plans to invest $29 billion in its oil and gas business and grow production by about 725,000 barrels of oil equivalent per day.
The investment also comes as a number of its competitors are re-focusing back on their core oil and gas business. For example, BP, which over the past year has closed solar panel factories in Europe and the U.S., significantly cut its clean energy investments from $1.5 billion to $1.0 billion.
About BP’s refocus on its core oil and gas business, the Financial Times writes:
[BP CEO] Tony Hayward, who succeeded Lord Browne two years ago, is pinning BP’s hopes for the future more firmly than before on oil and gas. As one former BP executive puts it, ‘oil and gas are in the company’s DNA”. Another says that, while the rest of the world is trying to move forward, Mr Hayward is “turning the clock back.’
Alternative energy provides less than 1 per cent of BP’s revenues and none of its profits. Capital spending will be about $20bn this year, of which at most 5 per cent will go into renewable energy. But the reason behind the faltering of its ambitions for the business are telling – both for the future of the oil industry and for the world’s energy supplies.
Exxon’s investments mark a milestone in the budding algae-based biofuel market, which so far has largely been backed by venture capital firms. The move could encourage other large strategic investors to enter the sector, which could help speed up overall biofuel production.