Exxon Mobil Invests Big in Algae and San Diego
Synthetic Genomics scientist with liquid.
By Terri Somers
BIOCOMMUNIQUE EDITOR
The world took notice this week: a biofuels cluster is growing in San Diego.
Exxon Mobil announced on Tuesday that it would invest up to $600 million in creating biofuel from algae under a collaboration with La Jolla-based Synthetic Genomics, founded by J. Craig Venter.
Through the collaboration, Exxon will pay privately-held Synthetic Genomics (SGI) up to $300 million in milestone-based payments for its research on coaxing photosynthetic algae to use the sun’s energy to convert carbon dioxide into oils and hydrocarbons for fuel.
Meanwhile, Exxon will invest another $300 million in-house for establishing its own biofuel research program.
Venter, a UCSD alum renowned for his role in sequencing the human genome, said Synthetic Genomics plans to build a greenhouse and test facility to study thousands of strains of algae from around the globe. His privately-held company currently has about 100 employees, and could double its staff through this collaboration.
“The real challenge to creating a viable next-generation biofuel is the ability to produce it in large volumes which will require significant advances in both science and engineering,” said Venter. "The alliance between SGI and Exxon Mobil will bring together the complementary capabilities and expertise of both companies to develop innovative solutions that could lead to the large scale production of biofuel from algae.”
In addition to Exxon’s partnership being validation of SGI, the deal is an affirmation for those who have invested money and scientific might to developing algae as a renewable fuel and San Diego as a hub of innovation in the field.
“This is a watershed day for algae biofuels,” said Stephen Mayfield, an algae researcher at the Scripps Research Institute. “The biggest and best company in the world has done its due diligence on renewable energy and decided to invest in algae, and picked San Diego in which to do it,” Mayfield said.
Venter started working with biofuels in the 1990s. After sequencing the human genome, he identified renewable energy and climate change as areas where he would apply his expertise to help society.
In 2005, he founded Synthetic Genomics. Company scientists have been working since then to develop a more efficient process for harvesting the oils from the algae. SGI researchers have also developed strains of algae the produce more oil, making them more cost effective than other strains.
“Having Craig Venter here has been an enormous plus for us because of his reputation and because he’s so focused on alternative fuels,” said Joe Panetta, BIOCOM’s president and CEO.
One of the major hurdles for this field will be making algal biofuels more cheaply and on a much larger scale. Right now it is about $30 a gallon to produce, according to some estimates. It would have to drop to under $2 a gallon to be a viable commercial fuel source, according to industry projections
Exxon Mobil did its due diligence on renewable fuels and companies working in the field for two years, before making its move into algae, said Emil Jacobs, a vice president of the energy company’s research unit. Jacobs said Exxon looked at several forms of renewable fuel sources and their potential to produce large quantities and overcome technical and distribution challenges.
The energy giant has been criticized in the past for its failure to invest in renewable fuels, while other companies, including BP, have signed investment deals in cellulosic ethanol, which turns sugars from plants and other organic matter into fuel. In fact, BP has a $90 million collaboration with Verenium, a company with a large research presence in San Diego, to develop a cellulosic ethanol plant in Florida.
“Meeting the world’s growing energy demands will require a multitude of technologies and energy sources,” Jacobs said. “We believe that biofuel produced by algae could be a meaningful part of the solution in the future if our efforts result in an economically viable, low net carbon emission transportation fuel.”
The green stuff needs minimal nutrients to grow, including carbon dioxide from the air and lots of sunshine, something that’s plentiful in San Diego. It can grow in soil that would never sustain food crops...
Algae also likes saltwater or brackish water, and may even take some pollutants out of it in the process, Mayfield said. As a fuel source, the amount of energy produced by 30 million acres of algae would require 150 million acres of corn or other plant sources needed to make ethanol.
Generally, the process for getting oil out of algae is the same as the process for turning vegetable oil into biodiesel. The oils are extracted from the algae and processed in existing refineries, just as crude oil is now refined to produce gasoline.
And the algae biofuel can be transported in the existing infrastructure for crude-oil based products.
For this biofuel science to be successful at commercial scale, and for it to work through the existing distribution infrastructure, Big Oil is going to have to play a significant role, said Steve Kay, Dean of Biological Students at University of California San Diego.
“This Exxon deal is just the kind of thing we were waiting for,” Kay said.
It is also the kind of deal that San Diego’s academic research and biotechnology sector has been hoping to see as it tries to position itself as a hub for biofuel research and development – a sort of “Green Houston”, Kay said.
According to the San Diego Association of Governments, there are about 272 scientists and other workers locally involved in researching the potential of algae for use as a biofuel, generating nearly $16.5 million in payroll and $33 million in economic activity.
Last April, local business executives, academics and elected politicians announced their plans to harness the region’s research expertise and the entrepreneurial know-how of the biotechnology industry. A consortium called the San Diego Center for Algae Biotechnology was created jointly by UCSD, Scripps, the Salk Institute, San Diego State University, BIOCOM and some of its member companies.
The consortium hopes to attract funding from the $800 million in stimulus funds being made available to the Department of Energy, as well as state funds and private investment. To date, the federal government’s investment in algal biofuels has been minimal to nonexistent, said Mayfield. Government money has, however, been invested in cellulosic ethanol.
The growing number of biofuel companies of all types in the greater San Diego region includes commercial algae farms in the Imperial Valley and San Diego's Sapphire Energy, a private company that last year produced algae-based diesel used for a test flight of a commercial jet.
While many people may think San Diego is trying to position itself as the algae capital nationwide, Sapphire's Chief Executive Jason Pyle thinks it already holds that title. That is why he moved his company from the San Francisco Bay Area to San Diego two years ago, he said.
“San Diego's excellence in this field is tops in the country and maybe the world,” Pyle said in April.
Last year Sapphire received $100 million from private investors. Mayfield, of Scripps, is a founder of that company.
Environmental groups that have been previously critical of Exxon Mobil said in an interview with the Union-Tribune that the SGI deal is a “game-changer as far as algae.”
“This money is enormous compared with other money that has been spent on algae,” Research director Kert Davies of Greenpeace told the newspaper.
San Diegans fostering the algae biofuels industry hope to see more cash flowing into the region as a result of this deal.
“I expect that in six months we are going to hear even better news about more partnerships and funding,” said Kay, of UCSD.
“We are witnessing the formation of a cluster, just as we did with biotechnology,” he said.
He recalled when Johnson & Johnson first came to San Diego, giving a sense of validation to the promise of the region’s biotechnology industry. Soon, drug giants Novartis and Pfizer opened up offices here.
Panetta, of BIOCOM, agreed.
Just like the drug companies, energy companies and entrepreneurs in this new and burgeoning field will realize that the thousands of researchers and innovative business people who work in drug development, and the research institutes that educated them, have the same skills that are needed to produce a biofuel industry, he said.
“As the scientists always tell me, basic manipulation of DNA is the same regardless of which area you’re working in,” Panetta said. “Whether it’s agriculture or biofuels or development of medicines, it’s basically molecular biology.”
Synthetic Genomics scientist with algae plate.