Block’s Indicator of Sustainable Growth

By Ray Block

The announcement on July 14 2009 that the largest oil company, Exxon Mobil is investing US$600 billion in a joint venture with Craig Venter’s Synthetic Genomics to produce algae cost effectively on a large critical scale is a shot in the arm for biofuels.

Exxon Mobil has continually denied the likelihood of peak oil. That is after allowing for depletion, conventional oil is reaching peak supply levels, and will subsequently decline. We are now told that Exxon has spent several years exploring various fuel alternatives.

It is surprising that the vice president for research and development at Exxon Mobil’s research and engineering unit, Emil Jacobs, told the New York Times (July 14 2009) that “we literally looked at every option we could think of, with several key parameters in mind. Scale was the first. For transportation fuels, if you can’t see whether you can scale a technology up, then you have to question whether you need to be involved at all.”

Jacobs said: “I am not going to sugarcoat this- this is not going to be easy. Any large scale commercial plants to produce algae based fuels are at least five to10 years away.”

The NYT said that according to Exxon Mobil, algal biofuel could yield more than 2,000 gallons of fuel per acre of production each year. This compares with 650 gallons per acre for oil palms and 450 gallons for sugar cane. Corn yields just 250 gallons per acre a year.

It is understandable that many people will be cynical at the company’s manoeuvres, and its lack of frankness. But on the positive side, the large scale investment with Venter’s firm confirms the reality that the most likely transportation fuels of the future will include carbon based algae, which would require no change in the existing transportation infrastructure in re-fuelling.

Other major oil companies are concentrating on biofuels, neglecting other renewables in the process. The New York Times story said that Royal Dutch Shell in June announced that it would freeze its research and development on wind, solar and hydrogen power, and now focus its alternative energy efforts on biofuels. Valero Energy Corporation, the largest oil refiner in the US has this year extended its operations to ethanol having acquired for $477 million the VeraSun Energy plants.  

Chevron is another oil major with interests in biofuels. Chevron chief executive, David O’Reilly, said last year: “renewable energy is very real. We need it. It will be an essential part of the future .But it’s not realistic to suppose we can replace conventional energy in a timeframe that some suggest.”

Chevron has spent about $3.2 billion since 2002 on “renewable and alternative energy and energy efficiency services.” It plans to spend $2.7 billion in the three years through 2011 on a variety of projects, including a business that helps improve energy efficiency for companies and government agencies.”

The case for biofuels in United States comes back to the US Renewable Fuels Standard (RFS). The RFS for 2009 provides for 10.5 billion gallons of renewable transportation fuel in the form of ethanol. This target will increase each year until 2022, when the RFS will rise to 36 billion gallons.

Of that total, 15 billion gallons will be corn based ethanol, and 21 billion gallons will come from advanced biofuels like cellulosic ethanol from woody materials and other sources. There is currently no mention in the RFS for algae based biofuels. But with the combined lobbying of the nine or 10 existing algae companies, including the three majors-Sapphire Energy, Algenol and Solazyme, and now with the heavyweight in the room, Exxon Mobil in Synthetic Genomics corner, that oversight will be corrected.