Singapore (Platts)--21Jul2009

Final development and broad deployment of algae-based biofuels by
ExxonMobil would require future investments of billions of dollars if research
and development targets are met, said a spokesman at ExxonMobil late Monday.
"If the R&D targets are met, the company expects to spend more than the
$600 million announced," he told Platts.
Last week the oil giant said it would put $300 million into what is seen
to be the largest financial commitment in biofuels so far by a oil major, with
a further $300 million to come if all goes well.
The company has formed an alliance with US biotechnology firm Synthetic
Genomics Inc., or SGI, to study and develop biofuels from algae that are
compatible with gasoline and diesel. Under the program, the oil major is
putting up $600 million, half for internal costs and the rest to SGI.
Initial reaction to that announcement was one of surprise from biodiesel
participants in Asia, partly because ExxonMobil is not a company generally
seen associated with renewable energy. But most applauded the move.
"Irrespective of whether the R&D succeeds, the effort demonstrates the
petroleum companies are definitely more concerned over the need of having
sustainable and renewable fuels," said Andrew Goh, chief financial officer of
Malaysia-based Carotech Berhad, which operates two plants in Perak that
produce more than 120,000 mt/year of biodiesel.
"I hope the R&D succeeds and it becomes commercially viable, as it would
allow another source of renewable and sustainable energy to be available.
Even if the R&D does not succeed or is not able to produce it [algae] in a
commercially viable manner, the knowledge gained would be tremendous and
hopefully this would lead to more findings and solution to our current limited
energy supply," he added.
Ubbo von Oehsen, general manager of Natural Fuel, said as with any R&D
project, the outcome is always uncertain and unpredictable, but should the
project be successful, first-generation biodiesel would benefit from it.
"One of the goals of this R&D work is to find superior algae strains
which can generate algae oil at low costs. This low-cost algae oil could be
converted to methyl esters in a first-generation biodiesel plant," he said.

ALGAE HAS POTENTIAL TO BE SCALEABLE
ExxonMobil said it zeroed in on algae after considerable study because it
has the potential to be scalable and a commercially viable transportation
fuel. It also dismissed comments from critics that it might be under some form
of political pressure to support the biofuels drive and hence just putting up
a smokescreen given the anticipated long lead time to prove the outcome.
"We are not interested in green-washing our credentials and we are
certainly not opposed to alternative renewable forms of energy. They play
important roles in meeting the world's energy challenge. In fact ExxonMobil
has been developing a variety of new technologies to help meet growing energy
demands and reduce greenhouse gas emissions. We have said that we would not
commit significant resources to biofuels development until we believed there
was a new technology that had real promise," the ExxonMobil spokesman said.
"We are still early in the program, but the anticipated level of
investment and the engagement of SGI are indicators of how serious this
project is for ExxonMobil," he added.
The announcement by ExxonMobil incidentally emerged just as BP was
pulling
out of its jatropha-planting venture with UK-based D1 Oils. D1 Oils said last
week that it planned to take back full ownership of the global planting assets
and interests of the joint venture to develop jatropha as a biofuels feedstock
by buying out BP's stake. Because of this, some biodiesel participants were a
little more cautious in their appraisal of ExxonMobil's latest move.
"It's well and good for ExxonMobil [to be putting such large investment
in biofuels]. But I have genuine skepticism over the total commitment. Is it
purely for research? Will they continue spending the money when the results
come out? If it doesn't work, will they still spend the money?" said Mike
Thorley, chief operating officer of Malaysia-based SPC Biodiesel, a unit of
the Australian Securities Exchange listed Sterling Biofuels Group.
"Regardless of their intentions, any investment in the development of
alternative fuels is essential for the survival of the planet, both from the
'peak oil' and the carbon control arguments. I support Exxon's direction and
applaud their long term commitment," he said.
ExxonMobil's investment undoubtedly marks a change in activity in the
renewable energy sector, and both ExxonMobil and SGI hopes that the alliance
will bring together complementary capabilities and expertise to develop
solutions that could lead to large scale production of biofuel from algae.

--Weilyn Loo, weilyn_loo@platts.com