Exxon has long denied plans to move into the biofuel market, but the oil company announced a plan today to invest $600 million in the production of biofuel from algae. As part of the plan, Exxon will partner with Synethetic Genomics, a biotechnology outfit, to develop the fuel. Exxon’s algae fuel investment includes $300 million for preliminary studies with Synthetic Genomics, and $300 more if the research goes well. But why did Exxon choose to endorse algae fuel when its competitors, including BP and Chevron, are banking on biofuel feedstocks like wood waste, jatropha, and corn?
Exxon is betting that algae fuel can be more easily scaled up than other types of fuel–even though large-scale commercial plants are up to a decade away. Additionally, Exxon believes that algae could reap over 2,000 gallons of fuel per acre each year, while palm trees produce 650 gallons, sugar canes pump out 450 gallons, and corn yields 250 gallons.
It’s a significant investent for Exxon, whose CEO, Rex Tillerson, famously derided biofuels as “moonshine”, though it’s not unprecedented. Exxon developed a critical part of the Maya 300 EV’s lithium-ion battery, and the company has given Stanford’s Global Climate and Energy project, which researches alternative fuels, $100 million over the past decade.
At the same time, Tillerson claimed just this past May that oil production hasn’t peaked and the world won’t move beyond coal, natural gas, and crude oil for 100 years. To be sure, a $600 million investment is nothing for a company with over $425 billion in revenue. But it could lead to speculation that Tillerson doesn’t wholeheartedly believe what he says about the continued dominance of petroleum. Or maybe Exxon just wants to get in on the 36 billion gallons of biofuel that Congress has mandated by 2020.