Gevo & Butamax – Remind Me Why I Care

by Sam Nejame (Promotum/Biofuels Digest) ... Both Butamax and GEVO have suffered mightily over the last few years, but the people, who have hung in there and put their careers on the line to make it happen may indeed have finally turned a corner.

This is why I care

So, why bang your head on the wall of thermodynamics and try to force biological systems to do things they don’t want to do (only to make pseudo-commodities)? Answer: Because nothing comes close to the market size and value of fuels and chemicals and if you’re big, small markets don’t move your revenue or net income numbers.

Take a look at ExxonMobil’s 10Q sometime. You will see what I call the 1040 rule in action. That is chemicals make up only 10% of refining revenues, but 40% of profits. We need to think of a biorefinery in the same way and it’s important to note, this works in reverse. Flavors and fragrances are great high value molecules, but they also represent very small markets. In terms of Industrial Biotechnology, that’s a lot of metabolic engineering for not a lot of product.

But the truth is large scale production of butanol has the potential to disrupt many markets, some obvious others less so. If implemented it could drastically increase corn production and spur construction of new plants along with the retrofitting of existing ethanol plants. Refiners would be able to blend and retake margins (and RINs) long lost to fuel distributors/retailers. In many parts of the country refiners could avoid expensive reformulated blendstock for oxygen blending and simultaneously utilize inexpensive heavier natural gas liquids from midstream suppliers. In the US, the largest blenders of butanol fuel oxygenate would likely include: Valero, ConocoPhillips, ExxonMobil, BP, Marathon Petroleum, Chevron and Sunoco.

And that’s just the beginning

If we take it a step further and think about butanol priced at fuel value, we could see many other potential impacts. Particularly, the replacement and substitution of petroleum based iso-butanol and n-butanol in chemical derivatives.

And of course, readily available butanol biofuel would impact nobody more so than Dow, North America’s largest captive producer of buoh and derivatives. In addition:

For butyl acrylates we would see impacts in the businesses of: Dow-Dupont and their progeny, BASF, American Acryl, Nippon Shokubai, and Arkema. For butyl methacrylate: Dow and Lucite. For makers of glycol ethers changes may be coming for: Dow, Eastman, and LyondellBasell. For butyl acetate: Dow, Eastman, and OXEA.

Butanol solvent and derivatives are widely used in paints and coatings. Availability of inexpensive high purity butyl fuel will create opportunities for paint makers: Axalta, Akzo Nobel, PPG, Sherwin Williams, and Valspar.

Other companies that could be impacted include: Ferro Corporation, Georgia Pacific Resins, US Amines, Taminco, Chevron Oronite, Rhodia, ICL Industrial Products, Lubrizol, Infineum, Afton and Elco.

Across the pond in Western Europe this will affect merchant buyers like Shell, Celanese, ICI, PPG, Evonik, Plastificantes de Lutxana, Proviron, and Polynt.

To be sure this is only a partial list and clearly, this is only going happen following the large scale conversion of ethanol plants and competitive pricing of iso-butanol. Still, what we are talking about could be very important going forward. The stakes are high and smart companies will have strategies ready before it starts to happen. While it’s easy to be cynical given the rocky performance of Industrial Biotechnology applications, it’s wise to consider that not so long ago the vast majority of ethanol was produced from petroleum feedstock. Butanol could easily see similar displacement. Change lies in every direction. So, now I guess we’ll just begin again. READ MORE