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Exxon Invests In Algal Biofuels

Project represents a new direction for oil giant

by Michael McCoy
July 20, 2009 | A version of this story appeared in Volume 87, Issue 29

Credit: SGI
Algal plates in Synthetic Genomics Inc.'s La Jolla, Calif., labs.
Credit: SGI
Algal plates in Synthetic Genomics Inc.'s La Jolla, Calif., labs.

After years of mostly sitting on the sidelines in the alternative energy game, ExxonMobil is joining in a big way. The oil and gas giant will invest as much as $600 million to develop algae-derived biofuels with California-based Synthetic Genomics Inc.

For Exxon and SGI, the goal is to genetically engineer photosynthetic algae to produce a hydrocarbon that can be processed in existing oil refineries and turned into fuels that work in existing cars.

If all goes as planned, Exxon will fund $300 million or more in R&D at SGI over five or six years. At the same time, Exxon plans to spend $300 million on research at its own labs in Clinton, N.J., and Fairfax, Va. Commercializing algae-based biofuels will cost billions of dollars more, the company says.

SGI was founded in 2005 by J. Craig Venter, one of the pioneers of human genome sequencing. Its early focus was on rewiring microorganisms to produce hydrogen and ethanol.

Exxon has long questioned the viability of corn-based ethanol as a transportation fuel. Emil Jacobs, vice president of R&D at ExxonMobil Research & Engineering, told reporters last week that the algae effort comes out of a high-powered company task force on alternative energy. After the task force explored the landscape for two years, "biofuels from algae rose to the top," he said.

SGI likewise stood out as a potential partner for Exxon because of its success in engineering algae to continuously secrete hydrocarbons. According to Venter, SGI's competitors rely on growing algae and periodically harvesting them for the oil they contain. With further development, the partners say, their algae could yield more than 2,000 gal of fuel per acre per year, versus just 250 gal for corn-based biofuels.

The agreement between Exxon and SGI gives credibility to algal biofuels, a field that "has had more than its share of fly-by-night promoters," says David Woodburn, a green technology analyst at the investment advisory firm ThinkEquity.

Although Woodburn agrees that algae have high potential, he points out that Exxon and SGI haven't decided on basics such as the specific organism they will use and whether they will grow it in open ponds or closed bioreactors. "They are going back to basic building blocks," he says.



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