Big Oil to Become Big Biofuels?


Photo via Siemens

For a long time, Big Oil got along with ethanol producers like, well, oil and water. But recently, it seems like the two industries have not only begun to learn how to play nice, but form business alliances. Oil companies are showing more and more interest in actually investing in ethanol companies and contributing to research. BP, for example, has recently formed an alliance with ethanol company Verenium, and is pouring billions of dollars into development. With oil prices fickle, and reserves depleting, could Big Oil be on its way to becoming Big Biofuels?Consider the case of BP, profiled in the NY Times:

Only two years ago, BP had only a minuscule investment in biofuels. But since then the company has committed $1.5 billion to various projects. Along with its work with Verenium, it entered a partnership with a Brazilian concern last year to produce ethanol from sugar cane.

Perhaps it's finally become clear to the company that the future of the oil importing and exporting business is limited, or perhaps the prospects of government funding (via the stimulus bill, budget) have become too alluring to pass up--either way, it seems oil companies have realized that they need to expand their operations in order to stay afloat.
"We can see biofuels as being a really big potential reservoir," said Phil New, president of the company's BP Biofuels unit. "For an energy firm to get into sugar cane farming is a pretty big move." Oil companies are still skeptical about conventional ethanol, especially the type made from corn, which they say corrodes pipelines and is inefficient . . . The plant here is just one sign that the big oil companies are now at least grudgingly accepting biofuels.

Not to be outdone, rival oil giant Shell has been upping the ante in the biofuels game as well.
Shell was the first of the big oil companies to venture significantly into the new biofuels, getting its toes wet in 2002 by providing money to a Canadian company called Iogen Corporation to research making ethanol from plant waste. Shell would not discuss how much money it is now investing in biofuels, but said it had quadrupled biofuel research spending since 2007.

And though investments in biofuels by both companies are relatively small scale in the context of their whole operations, it does represent a (however slight) shift towards a newer, (reluctantly) greener business model.
"There will be a need for all these fuels," said Graeme Sweeney, executive vice president for future fuels and carbon dioxide at Royal Dutch Shell. He predicted that the 1 percent of the world's transportation fuels that are biofuels today "could easily be 10 percent in the next decade or so."

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Tags: Carbon Dioxide | Carbon Emissions | Ethanol | Global Warming Solutions | Oil