In Strategy Shift, Exxon Plans $600 Million Biofuels Venture

By RUSSELL GOLD
After years of snubbing alternative fuels as a bad investment, global energy giant Exxon Mobil Corp. said Tuesday it will sink $600 million into researching how to turn algae into a biofuel that would also help fight global warming.
Exxon's partner in the biofuels effort will be groundbreaking genomics scientist J. Craig Venter and his company Synthetic Genomics Inc. The companies will attempt to develop algae strains that excel at both sucking up greenhouse gases and secreting oil that can be fed into refineries alongside conventional crude oil.

Shares in the world's biggest oil and gas companies head higher, boosted by the August crude-futures contract's move back above $60 a barrel. Jim Jelter reports.
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If the companies are successful in developing cost-competitive barrels of algae-based oil on a large scale, the Texas energy company said it could invest billions of additional dollars to build production facilities in the future.
Exxon's embrace of biofuels represents a strategic turnaround for one of the world's biggest refiners of transportation fuel. Exxon grew into the world's largest publicly traded company by extracting fossil fuels from the earth and converting them into gasoline, diesel and chemicals. But as global supplies of oil become harder to find and growing concerns about greenhouse-gas emissions inspire new attempts at government regulation, the concept of domestically produced oil derived from algae has become an alluring enough prospect to catch Exxon's interest.
Mr. Venter, a well-known biologist who led an effort to map the human genome, said the leap into algae-based fuels wasn't going to be easy: "The challenges are not minor for any of us, but I think we have the combined teams, scientific and engineering talents, to give this the best chance of success."
The two companies said they would like to use genetic engineering to develop algae strains that consume significant amounts of carbon dioxide, a gas produced by fossil-fuel use that is contributing to climate change.
Exxon's head of research, Emil Jacobs, said it was possible the algae farms would be located near power plants and other industrial complexes to use the carbon dioxide generated in those places as feedstocks for the algae.
Algae farms could produce two streams of income for the venture: one from selling barrels of algae oil to refineries and the other from capturing and reusing carbon dioxide. "It is reasonable to say you have to look at all commercial elements," said Exxon spokesman Rob Young.
Greg Singleton, a senior analyst with Point Carbon, an energy and environment market-analysis firm, cited industry findings that 40% of carbon-dioxide emissions from a coal-fired power plant could be reused, but it would require an enormous 13.1-square-mile algae farm. "On paper it looks attractive," he said, but cautioned, "I haven't seen it done on a large scale."
The U.S. Senate is set to soon take up the Waxman-Markey energy bill, which would cap greenhouse-gas emissions and allow companies to sell credits for any emissions savings they produce. Though it isn't clear how the proposed law would treat a carbon-munching algae farm, said Mr. Singleton, "In a carbon-constrained environment, it is something that could be very profitable for Exxon in the long run."
Executives stressed that the partnership will be focused on research, and it could take up to a decade to produce commercial quantities of fuel from algae.
Exxon's investment follows years of criticism from environmentalists and some shareholders for the company's reluctance to invest significantly in