|Pike Pulse Grid for oil majors commercializing biofuels. Source: Pike Research. Click to enlarge.|
With “easy oil” increasingly difficult to source and with an obvious stake in the future of the $2 trillion transportation fuel market, the world’s largest oil companies have begun charting strategies to bring biofuels to market at scale. According to a new Pike Pulse report from Pike Research, the oil majors currently best positioned to drive and profit from the growth of biofuels are Shell and BP.
The current biofuels industry accounts for nearly 30 billion gallons of production, and advanced biofuels production represents just a trickle Pike notes. However, biofuels are expected to play an increasingly important role over the next decade due in part to mandates imposed in at least 31 countries worldwide. With the cost of meeting those emerging mandates over the next decade estimated at $336 billion, access to the oil industry’s capital and expertise will be critical to scaling up biofuels production.
Pike Research also projects that total revenue from global biofuels production—both the conventional and advanced segments—will reach at least $171 billion by 2020.
The “Pike Pulse Report: Biofuels Commercialization by Oil Majors” evaluates ten of the leading publicly-traded international oil majors (BP, Chevron, ConocoPhillips, Eni, ExxonMobil, Petrobras, PetroChina, Shell, Statoil and Total) and rates them on 12 criteria for strategy and execution, including production strategy and roadmap; partnerships; geographic reach; investment portfolio; distribution network; and market impact.
The companies profiled in the report have collectively sunk billions into developing the biofuel industry over the last 5 years. While a handful are pursuing near-term production via proven, first generation pathways, all acknowledge that advanced biofuels must play a strategic role in the future energy mix. To varying degrees, these companies have established strategic partnerships and invested in innovative startups in an effort to build out integrated supply chain delivery networks.
While Pike Research does not perceive any of the oil majors to be outright industry leaders at this stage, several companies have demonstrated a solid foundation for growth and long-term success. Shell and BP both have advantageous near-term positions for ethanol production from sugarcane and strong commitments to commercializing advanced biofuel pathways.—senior analyst Mackinnon Lawrence
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With none of the companies falling into the Leaders category, 7 of the 10 profiled companies fall within the Contenders category. These companies demonstrate a solid foundation for growth and long-term success, but have not attained a superior position in the market, Pike explains.
Both Shell and BP—almost tying for top place—are pursuing strategies based on rapid scale-up in Brazil, where the efficient sugarcane market represents one of the most attractive biofuels markets over the next decade, with potential to supply sugar for advanced conversion technologies producing “drop-in” fuels as well. Shell scored slightly higher than BP in the Pike Pulse assessment thanks largely to its $12 billion venture with Cosan, one of the world’s leading producers of ethanol from sugarcane.
An early pioneer in the pursuit of advanced biofuels among oil majors, BP has made multiple investments across a number of potentially breakthrough feedstocks, participates actively in R&D efforts, and has built a strong portfolio of early-stage investments.
Third-ranked Total has charted out a similar strategy to Shell and BP, but its commitment to building out a delivery supply chain for biofuels, especially in Brazil, has to date been more conservative.
Pike ranks ConocoPhillips, Eni and ExxonMobil as Challengers. Although all three are “fundamentally sound” the report suggests, they have been more conservative in scaling up biofuels production.
ExxonMobil, ranked last, has made one strategic investment in a potentially breakthrough microalgae opportunity to date. However, the company’s long-term focus and lack of leadership in other areas resulted in lower scores overall in this Pike Pulse. Like all of the companies profiled in this report, it is worth noting that ExxonMobil has the level of capitalization available to accelerate advanced biofuels production if it so chooses due to considerable assets at its disposal.—Pike Pulse report