Financial Times: Shell hopes for sweet smell of success

By Ed Crooks
Published: March 26 2008 21:58 | Last updated: March 26 2008 21:58

Royal Dutch Shell is working on a process to turn sugars into a synthetic petrol, rather than ethanol, with the aim of moving to a commercial demonstration plant in two years’ time.

Europe’s biggest oil company on Wednesday announced a joint venture with Virent, a US biotech business based in Wisconsin, saying that results from early research over the past year had been better than expected in terms of costs and yields.

The initiative is the latest of Shell’s investments in a range of different technologies for “second generation” biofuels, which are more complex to produce but could avoid some of the problems of today’s main biofuels such as ethanol from corn.

However, the environmental and social gains from the Virent technology will depend on the type of sugars that are used to produce the fuel.

So far, none of Shell’s investments has proceeded to commercial production. Graeme Sweeney, the vice-president for future fuels, said not all were likely to be successful and the key decision for each venture would be at the end of the development phase, when the company would decide whether they could be commercially viable.

Jeroen van der Veer, Shell’s chief executive, has said he wanted at least one viable alternative energy business by 2015.

Virent’s process is different from standard biofuel production, which takes sugars from corn or sugar cane or other sources and ferments them to make ethanol.

It uses catalysts to convert sugars into hydrocarbons that are much closer to the standard petrol used in today’s cars.

The “biogasoline” fuel can be blended into conventional petrol up to a level of about 50 per cent without any engine modification, compared with a limit of about 10 per cent for ethanol.

It has a higher energy content than ethanol, which delivers significantly fewer miles to the gallon than petrol, and would avoid some of the handling problems of ethanol, which needs a separate distribution infrastructure from petrol.

Mr Sweeney said Shell believed the process “has the scope to be cost competitive” and would have “very good” total carbon dioxide emissions.

However, he said the fuel’s emissions performance would depend on source of the sugars used.

Sugars from plant waste, such as those Shell hopes to produce from its other biofuels ventures researching enzymes, would lead to greater reductions in emissions than sugars made from corn in the US.

Research suggesting that the environmental benefits of biofuels have been overstated, and fears that demand for crops for fuel is driving up food prices, have led to mounting concerns over policies to support biofuels in Europe and the US.

Shell’s biofuels deals

● Iogen In 2002, Shell linked up with Iogen, a Canadian biotechnology company, to develop a process for making cellulosic ethanol – a ‘second generation’ biofuel – from straw, using enzymes. In April 2004, Iogen said it was ‘in the final phase prior to full-scale commercialisation of cellulose ethanol’. Four years later, Iogen and its partners are still assessing the feasibility of a full-scale commercial plant

● Choren In 2005, Shell joined Choren, a German company now also backed by Volkswagen and Daimler, to produce biodiesel from wood chips. A commercial demonstration plant is due to open this year

● Codexis Shell began working with Codexis, a US biotech company, in 2006, also on enzymes for biofuel production. In November 2007, Shell announced that the collaboration had been successful enough for it to take a stake in Codexis and commit to a further five years of research

● HR Biopetroleum In December 2007, Shell set up a new majority- owned joint venture, called Cellana, with HR Biopetroleum, a Hawaii-based company, to build a pilot plant to grow algae producing oil that can be turned into biodiesel

● Virent Shell began working with Virent, a US biotech company specialising in producing fuel from sugar, in 2007. The two companies said on Wednesday they had exceeded milestones for yield and cost and were now working on scaling up technology for commercial production

Copyright The Financial Times Limited 2008

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