Why Don’t Oil Majors Invest in Biofuels at Scale?
by Jim Lane (Biofuels Digest) …Blue Marble’s effervescent CEO Kelly Ogilvie, well known on the renewables circuit for his high-energy presentations over the years, took us through the math.
“Over the past 18 months,” he said, “while we have been developing our technology, we have been watching the gen one failures in the fuel space. The whole business of producing a low margin product (like fuel) at high volumes is challenged, in many ways it is not working. Especially if you are raising equity. There just isn’t lots of money for lots of volume any more.”
…According to the CleanTech Group, VC invested $361 million in renewable chemicals during the first half of 2010. Their report opined: “While capital intensity had been a concern in the past, the sums required to reach commercialization are considerably less than in many other sectors such as biofuels,” the report said.”
“You have to ask yourself,” Ogilvie muses, “what is the market saying? It’s saying: less risk. Build smaller facilities. But how do you make that model sustainable. Higher value products, and find a high-end where no one can produce it as well as you.”
…BP has Butamax, but it wants someone else to put up the capital to go to scale. Shell has held onto its 50 percent investment in Iogen for six years since the that project’s pilot debuted, but has not written the check.
Why? According to Digest sources at oil majors, the reason that companies like ConocoPhillips, Marathon are “blowing retreat” on biofuels has little to do with attitude towards or the economics of biofuels. It has to do with the massive profits available in developing upstream assets in traditional oil & gas.
…(I)t is essential to remember that biofuels are above-ground oil fields – a different kind of proved reserve – that is to say, a renewable one. When the IRR of biofuels projects begin to exceed the upstream opportunities available to oil majors, that’s when scale will happen. READ MORE
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- Oil Majors Testing Clean Energy Waters
- Oil Majors – Big Brothers with the Deep Pockets, or Big Bother?
- British Airways Calls for Carbon Revenues to Be Used to Help Scale up the Development of Aviation Biofuels
- Water: Is There Enough for Biofuels at Scale?
- Waiting for Godot: The Financing of Commercial Scale Advanced Biofuels
