Tag Archives: ConocoPhilips

What Are the Major Alternative Fuels Interests of Oil Majors?

As the alternative fuels industry diversifies and scales up, financing is always the key to technology commercialization. While several sources of financing drive the whole industry forward, we investigate the trends of corporate financing from oil majors, based on a non-exhaustive database of over 1,000 deals and partnership engagements from 2000 through September 2014. With the focus on financial engagement, we only look into the private placement, equity stake, joint venture (JV), mergers and acquisitions (M&A), other than general partnerships. For example, we counted BP’s bioethanol JV plant with British Sugar, but we didn’t include BP’s research work with the Energy Biosciences Institute. We then drew a graph based on the investment counts (rather than invested companies) of the seven most activate oil majors in our database, namely, Shell, BP, Total, Valero, Chevron, Petrobras and Reliance. Particularly, repeated investment activities on the same company would be counted as multiple. We further sorted the investment by six core technology families – algae, biomass to sugar, catalysis, crop development, fermentation (and enzyme development), and pyrolysis/gasification.

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From our analysis of their activities in the alternative fuels industry, we find that:

  • BP leads the investment frequency in a variety of technology families. Particularly, it has a strong focus on the crop development by transgenics and breeding, with repeated investments made to Chromatin (client registration required) and Mendel Biotechnology (client registration required). It also continues investing on biomass to sugar technology including to handle cellulosic biomass, such as REAC Fuel (client registration required).
  • Shell is not a fan of crop development, but has a wide coverage on other technologies. For example, it invested on multiple rounds and formed a JV with Iogen (client registration required), but terminated the JV in 2012. Then the oil giant formed partnerships and JVs with Codexis (client registration required), Cosan, and Novozymes to continue its interests in cellulosic ethanol. Shell shifted its shares in Codexis to Raizen, its ethanol JV with Cosan and “formed the largest sugar and ethanol company in the world”. It also partnered with Virent (client registration required) on the biomass catalytic conversion to produce renewable gasoline, and Cellana (HR BioPetroleum) on algae biofuel. Moreover, Shell Foundation also funded Husk Power System (client registration required) on gasification development.
  • Total and Chevron are the most active corporate investors in the fermentation domain. Total did the private placement on the IPO of Gevo (client registration required) and formed a JV with Amyris (client registration required) with both focusing on corn and sugar cane feedstocks. Gevo is focusing on isobutanol fermentation and Amyris is doing the bioconversion to produce isoprenoids. On the other hand, Chevron invested in Codexis (client registration required) and LS9 (client registration required) with its concentration on the genetic engineering, while LS9 was acquired by Renewable Energy Group in early 2014 (client registration required). All invested companies by these two giants are diversifying their revenue streams with drop-in fuels, specialty chemicals, and/or drugs in downstream markets.
  • Velero has a strong focus on the drop-in fuel production either by bioconversion or catalysis. Valero owns 10 facilities in the U.S. with over 1,000 MGY corn ethanol capacity. However, it is also interested in cellulosic ethanol with its funding of Qteros, Mascoma Corporation (client registration required), and Enerkem (client registration required). Additionally, the focus on waste feedstock can be reflected by its investments in the ill-fated Terrabon (client registration required), which was focused on wet waste-to-gasoline.
  • Investments of oil majors in developing countries are more constrained by local resources and policy drivers. For example, Reliance is investing the algae technology developers such as Algae.Tec (client registration required), Aurora Algae (client registration required), and Algenol Biofuels. Petrobras is concerned with fuel production from sugar cane or bagasse, such as BTG-BTL (client registration required) and BIOecon, which combine the feedstock advantage and local policy driver. Other oil majors not listed in the graph, such as Chinese oil majors, Sinopec and PetroChina (CNPC), are shifting their focuses from food ethanol to cellulosic ethanol and coal-to-ethanol, which is responding to the call of the Chinese government to discourage the food ethanol industry (see the report “Fueling China’s Vehicle Market with Advanced and Coal-based Ethanol” — client registration required.)
  • Less active oil majors in this space include ExxonMobil and ConocoPhillips. They only made sporadic investments – such as Synthetic Genomics (client registration required) by ExxonMobil and ADM by ConocoPhilips. Additionally, ExxonMobil mobile recently teamed up with Iowa State University to research pyrolysis.

Our Take on Recent Headlines about SG Biofuels, CoolPlanet, and Joule Finance Deals

What the media reported about SG Biofuels: SG Biofuels recently completed a $17 million Series B funding round – the first funds raised for the company since a $9.4 million Series A in September 2010*. SG Biofuels said the funding will “advance commercialization efforts,” and that it has customers for 250,000 acres of jatropha.

What we think: SG is developing advanced jatropha to produce oils for biodiesel production. It claims its technology doubles the natural jatropha yield, and is targeting marginal, and otherwise undesirable, land for cultivation. Like other potential energy crops, jatropha has a very limited production capacity and, today, agricultural, municipal, and forestry waste are available in much larger quantities, and thus represent stronger near term options for next generation biofuels (see the report “Biofuels’ and Biomaterials’ Path to Petroleum Parity“*).

Aside from the lack of scale, jatropha faces issues* associated with crushing facility infrastructure, transportation, as well as toxicity. To overcome these key hurdles, SG has several strong partnerships positioned throughout the value chain, including Bunge, Life Technologies, and Flint Hill Resources. The latter two invested in the recent round. Because of these key relationships, SG is in a good position to be a leader in the jatropha-based fuels space, and companies looking to develop oil crops should engage, with the aforementioned key hurdles in mind.

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What the media reported about CoolPlanet BioFuels: Before the new year, CoolPlanet BioFuels raised an undisclosed amount of Series C funding round that included old investors GE, Google Ventures, ConocoPhillips, NRG, and new investor BP. CoolPlanet raised its $20 million Series B in March 2011.

What we think: With this new investment round, CoolPlanet continues its push to amass capital and world-class strategic investors. The company is developing small-scale (1MGY), portable pyrolysis units to convert agricultural waste such as wood chips and corn stover into a gasoline replacement.

The small-scale facilities open up niche markets for the units, while making it easier for the company to raise the necessary capital, collect the biomass, and attain the permits for construction. Though further data is necessary to affirm the efficiencies and economics of CoolPlanet’s small-scale production, the company is uniquely positioned as it is producing ethyl BTX, a gasoline equivalent and drop-in fuel.

For both SG and CoolPlanet, the key investors are also strategic, and such relationships will be essential as both companies scale. As start-ups continue the ongoing hunt for capital, corporate investors are leading the push while institutional investors withdraw from the industry (see the report “Hedging Bets with Flexibility in Alternative Fuels“).

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What the media said about Joule Unlimited: Joule Unlimited recently raised $70 million in private equity investment, bringing in over $110 million over the lifetime of the company, which broke ground at its first production site in 2011.

What we think: Though its fundraising to date has been impressive, we maintain our skeptical view on Joule due to the company’s inability – or unwillingness – to provide details on its lofty claims* In our previous conversation, CEO Bill Sims was unable to answer basic questions* about its Dutch subsidiary and fundamental cost metrics, among other items.

However, the real concern with Joule, underscored by the recent news item, is its lack of commercial partners. The company’s recent funding round, unlike SG’s and CoolPlanet’s recent rounds, did not feature any corporate investors. Though Joule’s ability to raise money in an environment where institutional investors are turning elsewhere does warrant some praise, its lack of commercial partners will hurt the company as it scales up its novel technology and faces a myriad of technical challenges. Companies and investors should approach with caution.

* Client registration required.

GE and partners back Emefcy’s energy-positive water treatment technology

Late last month, Energy Technology Ventures (a joint venture between GE, NRG Energy, and ConocoPhilips) announced plans to invest an undisclosed amount in Israeli company Emefcy. Additional investors included Pond Venture Partners, Plan B Ventures, and Israel Cleantech Ventures.

Emefcy has developed a microbial fuel cell (MFC) that uses naturally-occurring bacteria in an electrogenic bioreactor to treat wastewater and generate electricity. It works by using bacteria to biologically oxidize organic chemicals dissolved in wastewater. Specifically, the bacteria release electrons, free protons, and CO2 as part of their metabolic processes. The electrons are captured by the anode, while the free protons combine with oxygen that permeates the cathode to make water and complete the electrical circuit.

In effect, Emefcy’s technology harvests renewable energy directly from wastewater. This, the company claims, is less energy-intensive than conventional aerobic processes or methane-producing anaerobic digestion, and enables an energy-positive wastewater treatment plant. According to both Emefcy and Energy Technology Ventures, the benefits of this technology are both economic and environmental. In its release, Emefcy states that “conventional wastewater treatment uses 2% of global power capacity (80,000 megawatts and 57,000,000 tons per year of carbon dioxide), costing $40 billion per year.”

While GE’s interest in the technology is remarkable, arch competitor Siemens reported in a poster session at this week’s Singapore International Water Week that it is in the process of building its own pilot scale MFC.

Emefcy’s target markets include wastewater treatment in the food and beverage, pharmaceutical and chemical industries. We estimate that the addressable market size is $4.25 billion, comparable to that of membrane bioreactors plus conventional aerobic treatment equipment. The company plans to use Energy Technology Ventures’ investment to further develop the technology into a full-scale commercial plant by the end of this year “for municipal and industrial wastewater treatment,” said Emefcy’s CEO Eytan Levy.

GE is a large player in wastewater treatment, and is expanding its technology focus on Israel, calling it the “Silicon Valley of water technology.” In fact, GE recently opened its newest research and development center in Haifa, which will partner with local technology companies and universities to develop clean energy, water, and healthcare technologies. GE is also partnering with Kinrot Ventures, an incubator company that’s based in Israel and active in the water space.