Oil giant Chevron bets on biodiesel

Houston Chronicle via Checkbiotech ^ | February 26, 2007 | Brett Clanton

[thackney]

GALVESTON - Next month, the world will get a glimpse of what Big Oil can bring to the fast-growing alternative fuels movement when a new biodiesel plant here, backed by a major U.S. oil company, opens for business.

The plant, which can produce 20 million gallons a year of diesel fuel made from soybean oil, is among the largest of its kind in the nation and is expected to soon grow bigger. But what's more notable is that it is partly owned by Chevron Corp., the San Ramon, Calif.-based oil giant.

With the investment, Chevron has become one of the first major U.S. oil companies to move out of the laboratory with biofuels and into a factory that actually produces them, a path that biodiesel industry leaders hope its peers will follow.

Chevron's 22 percent stake in the $10 million plant, also financed by other institutional and private investors, is tiny compared with what it will spend to develop, say, a deepwater oil field in the Gulf of Mexico, which could run into billions of dollars. But the project, which looks like an oil refinery in miniature, represents a change in thinking at one of the world's largest energy firms.

"Over the last couple of years, our company has come to the point of view that there is more global demand for energy coming than we know how to meet the way we've always done things," Rick Zalesky, Chevron's vice president of biofuels and hydrogen, said during a recent tour of the Galveston plant. "So oil and gas will continue to be the major source, but is that enough? And we've concluded no."

The project will allow Chevron to gain experience producing biofuels on a broad scale, he said. In turn, the company will share technology and its refining expertise with an infant industry that is still wrestling with quality issues, he said.

U.S. biodiesel production more than doubled last year to an estimated 225 million gallons. The industry has set a goal to replace 5 percent of the country's petroleum diesel for on-road uses by 2015 — equating to about 2 billion gallons, said Joe Jobe, CEO of the National Biodiesel Board, a trade group in Jefferson City, Mo.

But the industry is depending on breakthroughs in crop research and farming to reach the goal, Jobe said. It will also need to use the nation's oil and gas infrastructure to blend, transport and pump the fuel for widespread use, which is why he called Chevron's endorsement of biodiesel a "good thing."

Promoted as a solution

Alternative fuels such as ethanol and biodiesel have been around for decades, but recently they have been promoted as a way to reduce America's dependence on foreign oil, keep U.S. farmers busy and address climate-change concerns.

But there are doubts that alternative fuels will ever represent more than a small fraction of U.S. fuel consumption. Even so, energy companies are placing some small bets on biofuels. Houston's Marathon Oil and Brazil's state-owned oil company Petrobras are investing in ethanol plants, BP is partnering with chemical giant DuPont to develop biofuels, while others such as Exxon Mobil are funding research through universities.

The team behind the Galveston biodiesel plant said they intend to have a piece of the industry in the U.S. and abroad.

The group is already laying plans to expand the facility. By this fall, the plant is supposed to be able to to churn out 60 million gallons of biodiesel a year, said Bill Spence, president and CEO of BioSelect Fuels, the Houston company that will operate the plant. He hopes to expand again to 110 million gallons a year by 2008.

Cheaper fuel sources

But to be successful long-term, Spence said, it is crucial that the plant migrate from making biodiesel from food crops such as soybean and palm oil, which are expensive and contain a low oil content, to nonfood crops with higher energy potential that are cheaper to buy, such as castor beans or Chinese tallow trees.

He is also confident Texas environmental regulators will come around on biodiesel. Last year, state officials nearly banned biodiesel from being sold in some of the populous areas of Texas, including Houston. They said there was conflicting science about whether the fuel produced more of a smog-forming tailpipe emission known as nitrogen oxide than petroleum diesel. In the end they gave the industry until the end of 2007 to make its case.

Ultimately, Chevron's investment in Galveston may provide a useful model for the oil industry's role in biofuels. But Zalesky said the company, no matter how big it is, knows not to wander too far from what it does best.

"Growing the crop," he said. "I don't ever see us doing that."

[thackney]

For ethanol production yes. But just like using the grain of corn, it is not a cellulose process. I thought that was your question.

[backbencher]

[ I thought that was your question.]

That was my question. But, I was wondering if diesel and ethanol could be produced from algae.

I found that diesel, ethanol and animal feed could be produce from the same harvest of algae. Seems like algae has a lot of potential.

[TKDietz]

Read the article more carefully. It doesn't say they've agreed to produce 900,000 gallons per year of biodiesel made from algae. What they've agreed to do is to buy 90 biodiesel reactors capable of producing a total of 900,000 gallons of biodiesel per year. Right now they are using sunflower seeds as their main feedstock but hope to make fuel from algae. Whether algae will work out for them as a feedstock remains to be seen. In the mean time they're going to use whatever feedstock they can get, sunflower seeds, caster beans, jatropha, whatever they can get for a good price.

They mention in that article a program we had in this country from 1978 to 1996 where our government funded biodiesel from algae research. It focused mainly on open pond aquaculture of algae, and none of those who received grants came up with commercially viable methods for algae production. The thinking in the industry now is that they'll have better luck with manmade "ponds" covered with plastic greenhouse materials or some other type of enclosed containers for the algae that will keep out wild algae and other contaminants that ruin the crops, and also so that they can better control the temperature and other variables that affect algae production. The problem so far with this is that it's incredibly expensive to go to so much trouble and it hasn't been possible yet to produce a fuel that comes anywhere close to being cheap enough to compete with petroleum based diesel, even with all the government subsidies available. Da Beers hopes to bring costs down and offset them somewhat by selling "carbon credits" to Europeans participating in the Kyoto Protocol. They want to use carbon dioxide from power plants and so on to feed their algae and to earn carbon credits to sell. No doubt they'll also try to get whatever government subsidies they can get from the South African government. But again, whether this will work out for them remains to be seen.

I'm not at all opposed to producing biodiesel from algae. In fact I hope it really works out. They can build algae ponds just about anywhere, although they'll probably have to be built in areas where temperatures stay within the range the algae can handle or they won't be able to produce year around unless they spend a lot of money heating the ponds. Another good thing about algae is that these ponds do not have to be built on highly productive farmland. They can put them where nothing else will grow, so there won't be any "food or fuel" complaints. Algae is a very simple organism that has a lot of potential as a fuel feedstock. Theoretically many thousands of gallons of biodiesel could be produced per acre of land, enough to supply dozens of drivers per acre. But again, we won't know whether it's really going to work out until we see large scale production of fuel from algae at a reasonable cost. So far many decades have been spent researching algae as a biodiesel feedstock, billions of dollars have been invested, and still no one is producing biodiesel from algae on a large scale. I hope we figure it out, but so far it just hasn't been a commercially viable option.

[ckilmer]

I'm sorry. This story was written up pretty extensively back in November. This piece gives more detail on the use of algae as feedstock for the project. you can find even more detail by googling: de beers algae.

You need to get into the habit of plugging keywords into google. you can do that faster than you can write paragraphs of stuff. It saves time and bother.

[You Dirty Rats]

The numbers are not percentages. Transportation accounts for 2/3 of petroleum consumption (13.28 / 20.65).

[thackney]

The numbers are not percentages.

I didn't claim they were.

Transportation accounts for 2/3 of petroleum consumption

The original post was "non-fuel", not limited to only transporation. Fuel would include heating and electrical power generation.

[TKDietz]

Again though you've misread these articles. Nowhere in any article you linked me to does it say they're going to be producing 900,000 gallons of biodiesel per year from algae anytime in the near future. In fact, the first article you linked me to talked about using other feedstocks, which is what they'll have to do unless they can succeed where no one else has before and come up with a commercially viable way to produce oily algae on a large scale and for a reasonable price. Believe it or not, I've done quite a bit of Googling up information on biodiesel, including quite a bit of information on biodiesel from algae. It's something I've taken an interest in and I'm probably more familiar with the current state of the technology than most laymen. So far there is no algae to biodiesel industry. It's all still in the experimental stages. Hopefully it will someday be commercially viable to produce biodiesel from algae. So far no one has succeeded in that regard. While I'd be just thrilled to see us get to the point where we can cheaply produce thousands of gallons of biodiesel per acre from algae, until people start actually growing algae on a large scale with yields close to those envisioned and at costs at least within the ballpark of being cheap enough to compete with petrodiesel, I'm going to have to take an "I'll believe it when I see it" stance.

"You need to get into the habit of plugging keywords into google. you can do that faster than you can write paragraphs of stuff. It saves time and bother."

Maybe you need to get in the habit of not believing all of the fluffy crap you read on the Net. A little healthy skepticism would go a long way for you. Reporters often times have no idea what they are talking about and a lot of them have agendas or are easily misled by people with agendas.

I do not disagree that algae could be a much better feedstock for biodiesel than any of the others we are using. If we could actually figure out how to produce the right type of algae on a large scale for a reasonable cost it would be far and away better than any of the current biodiesel feedstocks. I hope we figure it out, but we haven't done that yet. A lot have tried. Da Beers isn't the only company looking to use algae to clean carbon dioxide from industrial emissions now, or the only one trying to turn it into a viable biodiesel feedstock. I hope they succeed. But we won't know if they will succeed until they or some other company does succeed. So far none have even come close. My bet is that for many years at least this technology will still be in the experimental stages and while we might see some biodiesel produced from algae that has been used to clean CO2 from industrial emissions, we won't see large scale commercial production of biodiesel from algae for quite some time yet, if ever.

This is a stupid argument that is going nowhere. Believe what you want to believe. I wouldn't bet the farm on algae just yet, but that's just me.

[thackney]

I think you are missing the point. Why waste time actually learning about a topic when you can find something that fits your preconceived ideas? That is providing you don't actually read it too closely.

Thanks for the time you spend to contribute here. Many of us gain from it.

[TKDietz]

Thanks.

[Reeses]

no one is producing biodiesel from algae on a large scale. I hope we figure it out, but so far it just hasn't been a commercially viable option.

There already was a time when biodiesel from algae was a commercial success, and it went on for many thousands of years. The technology was whaling. The development of petroleum technology displaced it, but it stands that algae energy can be commercially used as a fuel source. Petroleum itself originally comes from saltwater algae. The reason there is no current use of algae is simply because petroleum is much cheaper, but that is changing. Petroleum can't stay at its current price for long since there are already cheaper alternatives. It's just the capital costs that keep us locked in for a while.

The birds were proof to man that airplanes were possible. Whales are evidence we can use algae for energy. We need a wartime style Manhattan Project to make the needed breakthroughs, spend some serious cash on genetic engineering. Biodiesel from algae appears to be one of the most promising directions for now.