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BP to Establish $500M Biofuels Research Center

14 June 2006

BP plans to spend $500 million over the next ten years to establish a dedicated biosciences energy research laboratory attached to a major academic center in the US or UK, the first facility of its kind in the world.

BP CEO Lord Browne said the company has begun discussions with several leading universities to identify which could host the BP Energy Biosciences Institute (EBI), with the aim of launching early research programs by the end of 2007.

Speaking in London today at the release of the BP Statistical Review of World Energy 2006, Browne said the new institute would focus initially on three key areas of energy bioscience:

  • Developing new biofuel components and improving the efficiency and flexibility of those currently blended with transport fuels;

  • Devising new technologies to enhance and accelerate the conversion of organic matter to biofuel molecules, with the aim of increasing the proportion of a crop which can be used to produce feedstock; and

  • Using modern plant science to develop species that produce a higher yield of energy molecules and can be grown on land not suitable for food production.

Browne said the EBI would be staffed by scientists drawn both from the host university and other academic institutions, along with a small number of specialists from BP.

The world needs new technologies to maintain adequate supplies of energy for the future. Bioscience is already transforming modern medicine and we believe it can bring immense benefits to the energy sector. By creating this integrated and dedicated research centre, we plan to harness a technical discipline with enormous potential to provide new energy solutions.

—Lord Browne

The EBI will undertake basic research freely accessible to the world’s technical communities as well as proprietary applied projects for commercial bioscience applications.

In the proprietary area, it will support the new biofuels business within BP’s refining and marketing division which has been created to address the increasing requirement that biocomponents be blended into traditional fossil-based transport fuels.

We expect demand for biofuels to rise significantly through the next decade to meet consumer desire for more environmentally responsible products and to satisfy the requirements of governments for more energy to be home-grown.

It is clear that this demand will outstrip availability without major investment to stimulate the development of new associated technologies that improve cost-effectiveness and broaden the range of biocomponents available globally.

—Lord Browne

In addition to its focus on advanced biofuels, the Institute will also look at broader applications of bioscience to energy, including improved recovery of oil, coal bed methane and carbon sequestration.

BP has also joined the Biotechnology Industry Organization (BIO)—the first fully integrated energy company to do so.

In 2005, BP purchased 590 million gallons of bio-ethanol (575 million gallons in the US) and 70 million gallons of bio-diesel for blending. The company is currently finalizing plans to make an E85 fuel available in one or more US markets towards the end of this year.

June 14, 2006 in Biodiesel, Biotech, Ethanol | Permalink | Comments (5) | TrackBack (0)

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Comments

Afaiac, this is a rather good idea. BP could probably maximize third-party funding for basic research projects if it sets up centers in both the US and the UK (i.e. in the EU). Depending on BP's corporate philosophy, these could either compete fiercely or collaborate closely.

Lord Browne also said, that in the medium term, oil prices will fall to 30 to 40$ a barrel. What's going on then with this Biofuels Research Center? My answer: Nothing any more.

Rafael Seidl: It seems to me, that you are quite naiv. What does that mean "basic research projects"? Because nobody on BP really hopes, that this alternative fuels come true. Iogen in Canada is about to build a commercial scale cellulosic ethanol plant. there they use common straw to produce ethanol. The same with Abengoa in Spain. Why do those guys want to do basic research. That's just a marketing matter.

Most of the world's remaining are controlled by foreign nations (Saudi Amaco, Venezela, etc.) A dictator can decide to nationalize the oil reserves at any time - BP's investment would vanish. BP and other oil companies would love to have a more stable supply such as biofuel, coal-to-liquid, or tar sands. This is why we have much more to fear from Climate Change than peak oil.

Jan -

don't forget that investors assess oil companies on their so-called proven reserves. In a nutshell, that is the amount the company expects it can bring to market at a profit in the future. US law is very conservative in how these complex estimates are computed. Shell got dinged severely (the CEO had to resign etc.) when it transpired that they had been more aggressive, extrapolating innovation trends in recovery technology and such. The other oil majors took note, of course.

As a result, all of them are now harder pressed than ever to replace reserves they are using up at a faster rate than ever. Exxon is in better shape than most, with significant domestic reserves. BP's domestic reserves (in the North Sea) are declining, and its bets in Russia are perceived as riskier. Therefore, it makes perfect sense for BP (and Shell, btw.) to invest heavily in alternatives to oil, especially natural gas and biofuels. Shareholders want to see dependable future revenue streams, so saying that BP and others involved in biofuels are just greenwashing for the sake of PR may not be accurate. They are simply not in as comfortable a position as say, Exxon.

Btw, Shell, VW and Iogen have announced they intend to set up cellulosic ethanol production in Germany. BP is similarly interested in securing a share of the alternatives market created by the EU's alternative fuels directive (20% by 2020). To get there, there is still a lot of basic research to be done in fuel crop genetics, fermentation / syngas processes etc. For example, algal oil is promising but still very much at the laboratory stage.

Moreover, GBP 500 million is nothing to sneeze at, and BP clearly indicates the proposed center will be staffed primarily by academics rather than in-house researchers. That suggests a focus on basic research, much like that of Bell Labs and Xerox Parc in their respective areas. If governments are unable or unwilling to fund such research, corporations have to, for their own long-term survival. Normally, this takes the form of project-oriented co-operation and funding for selected universities. Here, BP is proposing something larger and more permanent, no doubt hoping to employ the best and the brightest after they complete their PhDs.

Of course, BP has left itself a back door for diverting funds to proprietary applied R&D should the basic research yield insights that lead directly to patentable IP and a competitive advantage. They are not a charity, after all.

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