By - Apr 8, 2011 5:03 AM ET
Royal Dutch Shell Plc (RDSA), the world’s biggest distributor of biofuels, is shifting research to waste from sugar-cane farming after ending an algae project in Hawaii.
Shell, Iogen Corp. and Codexis Inc. (CDXS) have been researching enzymes to produce cellulosic ethanol from wheat stalks and sugar-cane bagasse, a sugar industry waste product. The Anglo- Dutch company has set up a $12 billion venture with Cosan SA Industria & Comercio to produce and market traditional sugar- cane ethanol in Brazil, where it’s used to fuel cars.
“Brazil still leaves a lot of plant material on the fields to burn,” Mark Williams, downstream director at Shell, said in an interview in Paris. “The idea is to apply this technology with existing plants or next to existing plants” and to “accelerate the application of these things, if they work technically, by a substantial fraction.”
The Hague-based Shell, Europe’s largest oil company by market value, expects the share of renewable energy in transport fuels worldwide to double over the next 10 years. In January, Shell exited its Cellana algae biofuel research joint venture in Hawaii that was formed in 2007 with closely held algae biofuels company HR BioPetroleum Inc.
“It just wasn’t getting adequate yields to be sensible to continue,” Williams said.
Some other companies, such as Exxon Mobil Corp. (XOM) are continuing research in biofuels from algae.
$12 Billion Venture
Shell and Cosan, which controls the world’s largest sugar- cane processor, last year agreed to combine ethanol-making and fuel distribution assets in Brazil. Shell agreed to contribute about $1.6 billion of cash and assets including 2,740 service stations, while Cosan put up 23 cane-crushing mills, 1,730 gas stations and other assets.
Shell has also contributed its shares in Codexis and Iogen Energy to the partners’ venture, called Raizen SA, which is worth $12 billion, Williams said.
“The initial position of the venture will be that it’s actually remain short of ethanol and we have to buy ethanol locally in Brazil to meet needs,” he said. “The ambition is to grow the ethanol output of the venture and if arbitrage opens globally there’s opportunity to trade Brazilian ethanol in Europe or in the U.S.”
Raizen’s ethanol annual output will more than double to 5 billion liters within five years, Chief Executive Officer Vasco Dias forecast in February.
The cellulosic ethanol technology will let Shell and Cosan further grow fuel output in Brazil. The partners need to scale the process to a pilot project from a demonstration plant to see if it works and that may take as long as five years. If successful, industrial-scale production may start by the end of the decade, according to Shell.
“The technology even hasn’t been scaled to this sort of magnitude,” Williams said. “We have more work to do.”
To contact the reporter on this story: Eduard Gismatullin in London at egismatullin@bloomberg.net
To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net
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