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ExxonMobil investment lifts San Diego’s algae biofuel industry

19 July 2009 No Comment

By Helen Kaiao Chang

See original story on SDNN

It’s boomtime for San Diego’s algae biofuel industry.

ExxonMobil’s huge partnership with San Diego biotech company Synthetic Genomics Inc. catapults the city to the top the world’s algae biofuel centers, said experts.

It also brings excitement and hope to other players, promising a boon of jobs and resources to San Diego’s nascent biofuel industry.

“This is incredibly exciting news,” said Steve Kay, director of the San Diego Center for Algae Biotechnology, a consortium of UCSD scientists, investment and industry leaders. “This is wonderful validation for all the efforts that are ongoing for us in San Diego region to create a biofuel-based economy.”

ExxonMobil Research and Engineering Company announced plans Tuesday morning to invest $600 million with SGI to develop the next generation of photosynthetic algae biofuels. The oil giant will invest $300 million in its internal research and at least another $300 million in the La Jolla company.

The investment is the single-largest biofuel deal in the world, said J. Craig Venter, founder and chief executive officer of the privately-held company.

ExxonMobil spent two years doing due diligence on the biofuel industries, before choosing to partner SGI.

“It helps puts San Diego on the map in this arena,” said Venter.

SGI’s plans

ExxonMobil will disburse payments over the next five years, pending SGI reaching certain research and development milestones, said Venter. The privately-held company is based in La Jolla, with additional operations in Washington D.C.

SGI plans to start expanding in San Diego immediately. The company has already started scouting for locations to build a test facility, to be located as close as possible to its current Torrey Pines laboratories. The building is expected to be completed in the next 12 months, said Venter.

In addition, SGI plans to hire more staff immediately, with 100 new employees planned in the next year. These mostly comprise scientists, engineers and software engineers, Venter said. (For SGI jobs, click here)

A graduate of UCSD, Venter said San Diego is ideal for SGI’s expansion. The weather is conducive to growing algae, as well as recruiting scientists attracted to the region’s quality of life. San Diego’s research culture is also a plus.

“I find it to be one of the most collaborative and interactive places in the country for science,” said Venter.

Algae center

The financial impact for San Diego is potentially huge.

Currently, the algae industry employees more than 500 workers, generates $25 million in wages and contributes $63 million to the general economy, according to statistics provided by Monica Clark, an economist at San Diego Regional Association of Governments (SANDAG).

Every $100 million investment in the algae biofuels industry generates 210 jobs, $11.8 million in wages and $29 million in economic activity, according to SANDAG.

A $300 million investment will mobilize San Diego’s workforce and resources. “It’s clear that it’s going to create jobs,” said SD-CAB’s Kay. “This bodes very well for the economic development in San Diego.”

See related stories: Algae biofuels industry bolstered by new partnership

Algae biofuels promise new industry in San Diego

The deal will also attract other investors into the space, experts said.

ExxonMobil’s presence in San Diego fulfills a missing link of big oil in San Diego, said Stephen Mayfield, a board director of Sapphire Energy, one of the largest biofuel companies in San Diego.

It could also attract more government funding. “I hope this shows to the (U.S.) Department of Energy they are lagging way behind in commercial investments,” said Mayfield.

Exxon’s commitment will help attract private investors. Kai Energy, an algae technology start-up that is actively seeking private and public investors, said the latest news will help fundraising efforts.

“It’s a strong endorsement that micro-algae is an economically viable and sustainable alternative to petroleum,” said Frank Infelise, president of Kai BioEnergy. “When one of the world’s largest companies makes an investment of this size, it’s an incredible endorsement that micro-algae-to-biofuel technology is the alternative fuel of the future. ”

Downstream business

The Exxon-SGI deal will also have indirect benefits for smaller companies that work downstream from SGI.

SGI may turn to other San Diego companies to help with processes in creating biofuel products, such as separating oil from organic matter, and refining raw oil into biofuel, said Kai’s Infelise.

“The indirect benefit is that it puts San Diego on the map as the center of excellence in the U.S. for micro algae to biofuel technology,” said Infelise. “That will attract lots of resources, including investment, knowledgeable scientist and engineers, and a network of companies to support this whole industry.”

Other biofuels

While other companies are developing other forms of biofuel, such as cellulosic, there is plenty of room in the market, said Sapphire’s Mayfield. Noting that a country’s GDP growth is directly tied to the amount of energy available, he said, “We need every energy molecule we can get.”

The acceleration of the algae biofuel industry may mean that algae biofuels could be available on a mass consumer level within three years, said Mayfield.

Sapphire’s biofuels have already been used by Continental Airlines to fly planes. “It’s doable,” he said, “It’s a matter of getting the economics in place.”

Follow Helen on Twitter @HelenChang.

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