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Berkeley ENVECON 143 - Big oil’s biomass play

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Big oil’s biomass play Testing the waters Big is big Growing an industry Figure 1 Taking it to the streets.Table 1 Selected oil-university biofuels research partnershipsBox 1 Eni explores algae REFERENCESNATURE BIOTECHNOLOGY VOLUME 25 NUMBER 11 NOVEMBER 2007 1 2 0 1Big oil’s biomass playMoney is flowing into universities from the major oil producers. What is their agenda? Cormac Sheridan investigates.On February 1, the oil giant BP announced that it had selected the University of California (UC), Berkeley, and two other institutions, as its strategic partners in a biofuels research ini-tiative. The sheer scale of BP’s planned invest-ment has thrown a spotlight on oil industry participation in this nascent sector. The Energy Biosciences Institute (EBI), which will also involve the Lawrence Berkeley National Laboratory (LBNL), the University of Illinois at Urbana-Champaign, and a group of in-house BP researchers, by no means represents the first foray of a major oil company into bio-fuels research (Table 1). With a total budget of $500 million over ten years, however, it is by far the largest and the most ambitious.At a local level, BP’s imminent arrival on the Berkeley campus aroused the ire of a vocal minority who is suspicious of any corporate involvement in university research. It also raises questions about the nature of its rela-tionship with the Joint BioEnergy Institute (JBEI, pronounced ‘jay-bay’), a $125 million initiative on cellulosic ethanol led by LBNL, which will be funded by the US Department of Energy (DOE). But BP’s entry into the big eth-anol game prompts wider questions about an industry famed for its oligopolistic tendencies extending its reach into what many believe could be the key non-fossil-fuel–based source of transport energy in the coming decades.Testing the watersAt a superficial level, all of the oil companies participating in biofuels research want to make money— or at least gain a better understanding of how it might be possible to make money—from ethanol and from other liquid fuels derived from cellulosic biomass, such as butanol and dimethyl ether. They are facing into a future regulatory environment that will be increasingly hostile to carbon dioxide emissions and a future market environment that will be characterized by rising demand due to economic growth in low income countries. “Reconciling those two things is where biofuels comes in,” says David Levy, professor of management at the University of Massachusetts, in Boston, who has carried out research on the strategic responses of businesses to climate change. But Rick Zalesky, the vice president of Biofuels and Hydrogen at Chevron Technology Ventures (Chevron’s venture arm; San Ramon, CA, USA) points out “What helps a lot is that if I sell a gallon of ethanol today, it didn’t mean I didn’t sell gas. There’s growth. It’s a bigger pie.”Though significant, the level of oil compa-nies’ investments in biofuels is still miniscule compared with their ongoing capital expen-diture in their core oil and gas activities and their multi-billion dollar share-buybacks. “My guess is the industry has to get to a certain scale before it’s going to get meaningful and mate-rial for these large companies,” says Carlos Riva, CEO of Cambridge, Massachusetts-based Verenium, the vertically integrated cellulosic ethanol producer formed earlier this year from the merger of Cambridge-based Celunol and San Diego-based Diversa. “Right now, the industry is still so much in its infancy, these projects and investments are relatively small from the perspective of large oil companies.”“No one in this industry is rushing, that’s for sure,” says Andrew Logan, oil program director at Boston-based Ceres, a coalition of activist investors and environmental groups, which is focused on making environmental sustainabil-ity a corporate governance issue. Nevertheless, BP has taken the most consistent approach to engaging with the climate change agenda, he says. Unlike its European rival Shell, of The Hague, in the Netherlands, it is not investing heavily in the “carbon-intensive side of the busi-ness,” in unconventional fossil fuel sources such as tar sands, which have unfavorable emissions profiles. Exxon, of Irving, Texas, is also more circumspect about the short-term potential of renewables and more aggressively focused on business as usual. “Exxon has explicitly said they’re investing in technologies that won’t ripen for 30 or 40 years,” says Logan.The attractions of biofuels for oil companies are manifold. Incorporating biofuels into the energy economy would be a gradual process rather than an abrupt and risk-laden shift. The very act of blending ethanol with petro-leum would be mirrored at a corporate level in blended strategies that encompass the exploi-tation of both. “It builds on their existing core expertise rather than replacing it,” Levy says. “It’s that notion of continuity that companies are looking for.”Big is bigThe major international oil companies already have a pipeline, distribution and retail infra-structure in place, as well as the refining and blending capabilities necessary to make mod-ern fuel products that include ethanol or other biomass-derived energy sources. “Finally, most compellingly, it’s about scale,” says BP chief scientist Steve Koonin. If biomass-based fuels are to have a significant impact on carbon dioxide emissions, he says, they will need to be deployed at the kind of scale at which oil companies, but not many others, are capable of operating.Figure 1 Taking it to the streets. The University of California at Berkeley’s deal with BP raised some red flags among some members of the community.Paul Chinn, San Francisco Cronicle/PolarisN E W S F E AT U R E© 2007 Nature Publishing Group http://www.nature.com/naturebiotechnology1 2 0 2 VOLUME 25 NUMBER 11 NOVEMBER 2007 NATURE BIOTECHNOLOGYBP invited proposals from five universities before selecting the UC Berkeley-led consor-tium—ahead of UC San Diego, Massachusetts Institute of Technology, Cambridge University in the UK and Imperial College London. Winning the two bids was part of UC Berkeley’s and LBNL’s strategy from the outset, says Beth Burnside, vice chancellor for research at UC Berkeley. It was part of a wider effort in alter-native energy, known as the Helios


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