For some time, Shell watchers in the biofuels sphere have been hard pressed to determine exactly how the company will proceed in developing out its advanced biofuels strategy.
After a stunning move to establish a $12 billion joint venture with Cosan, Raizen, focused primarily on Brazilian sugarcane and first-generation ethanol, Shell was expected to explore Iogen and Codexis technology for cellulosic ethanol from the millions of tons of sugarcane bagasse produced by the Raizen sugarcane ethanol fleet.
After all, observers reasoned, Shell contributed its holdings in Iogen and Codexis to the Raizen JV, and both companies had both made painful changes in top management as they sought to improve their timelines towards commercial success.
Shell focuses in on biofuels
At the same time, Shell had said as far back as 2009 that it would concentrate its investment activity in renewables on biofuels. Shell’s executive director of gas and power, Linda Cook, said at the the time, “It’s now looking like biofuels is one which is closest to what we do in Shell. Wind and solar are interesting [but] we may continue to struggle with other investment opportunities in the portfolio even with big subsidies in many markets. We do not expect material investment [in wind and solar] going forward.”
Last November, at the annual F.O. Licht’s World Ethanol & Biofuels conference in Spain, Arthur Reijnhart, the General Manager for Alternative Energies and Fuel Development Strategies, re-affirmed Shell’s opinion that biofuels are the best alternative energy solution for transport fuels and stressed the importance of diversity in products, including different biodiesel blend levels for light duty vehicles and freight.
Ominously, Reijnhart alluded to continuing problems in developing a commercially viable cellulosic ethanol solution. “The challenges of upscaling cellulosic ethanol in a commercially viable way and with reliable processes are enormous,” Reijnhart said, adding that “deep pockets, patience and the right kind of government support” were the essential prerequisites for development of this sector.
Shell: Focused on biofuels, but not yet in love
Back in 2010 we wrote of Shell’s development process for biofuels:
“An oil company investment committee process is a trial by fire that the designers of the Inquisition might well have taken some notes on.
“You are up against, to give an example, a $400 million internal upgrade to an off-shore platform that is using known technology to produce a known return, for the production of oil and gas that the company is entirely comfortable with,” an industry executive told the Digest, requesting confidentiality. “Even if you pass through that, investment is on a stage-gate process, and they are really, really serious about internal controls and hurdles. ”
“Another problem stemming from oil company investment is, in fact, the size disparity between oil companies and their biofuel investments. The largest advanced biofuels plant capacity currently under development in the US is the 100 Mgy AltAir camelina biofuel facility in Anacortes, Washington. A small Shell oil refinery in the same town — ranked only 50th in the country in size, among refineries, produces 100 million gallons every three weeks.”
All of which made Shell’s decision not to contribute its holdings in Virent Energy Systems to the Raizen joint venture of great interest.
The Shell-Virent background
Shell invested in Virent back in June 2010 after the successful startup of the Virent “Eagle” demonstration plant, producing 10,000 gallons per year of biogasoline, a drop-in renewable fuel.
In total, Virent closed $46.4 million in funding in 2010, while Shell and Cargill deepened their commitment to Virent’s technology platform. Shell also took a seat on Virent’s board. The “Eagle” project represented a 100X scaleup from the company’s previous bench level, and utilizes sugars derived from biomass, passed over over catalytic process, similar to oil refinery. Virent CEO Lee Edwards said that the company was using primarily sugarbeet sugar, and has tested cane, corn in the pilot plant as well; at bench level, the company has also tested sugars from non-food biomass.
“This investment demonstrates Shell’s confidence in Virent’s catalytic biofuel production processes,’’ said Luis Scoffone, Vice President of Alternative Energies at Shell. ‘‘The expansion of our joint technology programme to include research into the production of diesel from plant sugars offers considerable potential and complements Shell’s wider biofuels portfolio.’’
So, why did Shell keep Virent out of the Raizen JV? Too unimportant a technology…or too important? Well, for one thing, its Virent investment postdates the foundational agreement that created Raizen. But there’s more to the story.
The penny drops
On Friday, Royal Dutch Shell announced that it has built a next generation biofuels pilot plant at Shell’s Westhollow Technology Center in Houston, USA, to produce drop-in biofuels rather than ethanol. It uses a thermo-catalytic process technology licensed from its commercial partner Virent, which is similar to the process being used at the Virent pilot plant in Madison, Wisconsin, USA.
“Drop-in biofuels produced by this process have the same properties as conventional fuels,” said Shell in a media release. ” This eliminates the need for additional blending and storage infrastructure as well as engine modifications that are required for the use of ethanol in blends with conventional fuels. The Westhollow plant will explore the use of a range of feedstocks, starting with sugars and with the completion of an expansion currently under way, non-food cellulosic alternatives, leading to the production of a range of products, including gasoline, diesel and jet fuel.
“This allows us to explore further biofuels options as we continue to actively manage our advanced biofuels pathways to identify a feasible set of commercial solutions” said Luis Scoffone, Vice President, Alternative Energies at Shell.
The bottom line
Why build a pilot plant in Houston when Virent already has one in Madison? Focus and acceleration. Shell’s seen something, and it wants control over the testing timelines and parameters. Over in Madison, VIrent is busy supporting not only its opportunities in fuels, but in renewable chemicals such as paraxylene, for which it received an investment recently from the Coca-Cola Company.
On that latter technology, we wrote in December: “It’s renewable PX, also known as your friend, paraxylene — a key, but as yet undiscovered at affordable cost, anchor in the production of plastic bottles entirely from renewables. The search for renewable PX took a new twist yesterday in New York, when the Coca-Cola Company turned on the klieg lights to announce multi-million dollar investment and partnership agreements with Gevo, Virent and Avantium. The goal? To accelerate development of the first commercial solutions for its next-generation PlantBottle packaging, using renewable PX. The goal with each of these three agreements is to ensure that the companies a) produce the materials that Coke needs, b) produce them in big quantities, and c) as soon as possible, please.”
How soon for the black smoke or the white smoke to emerge from the chimneys over the conclave down in Houston, signifying great progress (or not) in drop-in biofuels? Iogen has had its pilot running for nine years. But we suspect that, given the progress Virent has been making in Wisconsin, that we will have an announcement in 2012 or 2013 on Shell’s plans for the Virent technology.
This article was originally published on Biofuels Digest and was republished with permission.