Bloomberg: Exxon $600M algae investment makes Khosla see pipe dream
Solazyme Inc. is harvesting brown paste made of sugar cane waste and mixing it with algae and water. The algae inhales the sweet-smelling treat -- filling themselves with fatty oils, doubling in size every six hours. The result? A slightly viscous liquid.
After drying the algae, wringing out the oil and shipping it to a refinery, their prize is revealed: diesel fuel that CEO Jonathan Wolfson says is chemically indistinguishable from its petroleum-based equivalent and which has already powered a Jeep Liberty and a Mercedes Benz sedan.
“We’ve produced tens of thousands of gallons, and by the end of 2010, I hope I can say we’ve produced hundreds of thousands,” Wolfson, 39, says. “In the next two years, we should get the cost down to the $60 to $80-a-barrel range.”
At that price, Solazyme’s algae fuel would compete with $80-a-barrel oil.
In addition, algae, mostly single-cell photosynthetic organisms, can yield 30 times more oil than crops such as soy. And algae oil doesn’t need much processing before it can power a car, truck or jet engine and it also eats twice its weight in carbon dioxide, reducing what some scientists say is a leading cause of global warming.
Exxon Mobil Corp. threw its weight behind algae in July 2009. The oil giant, often a target of environmentalists for dismissing concerns about global warming, is investing $600 million.
Exxon is working with La Jolla, California-based Synthetic Genomics Inc., a company founded by J. Craig Venter, who in 2000 mapped the collection of human genes. Venter’s team is working on changing the genetic code of some algae to make it easier to extract the oil.
Algae proponents differ on growing methods. Open ponds, the choice of most researchers, rely on photosynthesis. Algae grow and fill with oil as they use sunlight to convert carbon dioxide into sugar and chemical energy. Ponds, though, can get infested by pesky, low-oil native organisms or become the targets of microscopic aquatic creatures.
That's why Solazyme is going with fermentation, producing its algae without light in metal vats and adding sugar or other feedstock before the algae are dried and the oil extracted.
“We put algae in a tank and feed them sugar, such as sugar cane waste, and they make oil and we take the oil out. There’s a lot of science involved, but it’s a bit like making beer,” Wolfson says.
The company has raised $76 million from VCs such as New York-based Braemar Energy Ventures and Menlo Park-based Lightspeed Venture Partners, has a contract with the U.S. Navy to provide 1,500 gallons of jet fuel. It also received $8.5 million to deliver 20,000 gallons of fuel for Navy ships.
Wolfson says he needs $150 million to build a commercial plant to produce 100 million gallons a year. And he predicts they can get algae oil down to $60 to $80 a barrel within 12 to 24 months.
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