Tag Archives: British Petroleum

Industrial biotech’s holiday shopping spree: DSM nabs Martek and DuPont takes Danisco

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Like U.S. consumers celebrating holidays and post-holiday sales, chemical giants have been in the mood to shop lately, and biotech is on their lists. Earlier this month, DuPont announced that it is buying Danisco for about $6 billion. DuPont is, of course, an iconic chemicals and materials company, while Danisco is an industrial biotech company, making chemical “parts” for products as diverse as biofuels, foods, and detergents.

This big news came close on the heels of DSM’s bid of $1.1B for Martek, an algae company (the biggest one, actually) that makes food ingredients and nutrition products, but dabbles in biofuels, as well (BP has a biofuels JDA and $10M investment with Martek). Also, just a few months earlier, DSM bought another nutrition/biofuels company, Microbia.

Why are these transactions important? Because they provide further evidence that traditional chemicals and materials companies are expanding beyond petroleum-based materials and industrial chemicals to get into biotechnology – but they’re not just using small investments in small start-ups to do so. There are two huge strategic drivers behind the trend (see the January 5, 2010 LRBJ – client registration required). First, there’s the erosion of the basic petrochemicals commodity business by new entrants from oil-producing nations, like SABIC; and, second, there’s the opportunity to leverage biotechnology to produce new chemicals and materials at the high-performance edge of the spectrum (see the September 15, 2009 LRBJ – client registration required). With the stakes now in the billions, expect more M&A activity targeting larger biospecialists like Novozymes as the agriculture, chemicals, and energy industries pursue the same opportunities in biomaterials and biofuels.

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Drilling, spilling, and tilling: Will Obama act on the BP oil catastrophe with rhyme and reason?

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It’s said that history doesn’t repeat itself, but sometimes it rhymes. Shortly after the BP Deepwater Horizon explosion in the Gulf of Mexico, biofuel supporters were chanting “Till, Baby, Till!” in a parody of offshore drilling supporters’ cries of “Drill, Baby, Drill!” at Sarah Palin rallies last year. In the same spirit, political commentators have sought the right rhyme for the giant oil spill itself among prior comparable catastrophes. The disaster was initially called “Obama’s Katrina” by the President’s political enemies, comparing his inaction to President Bush’s widely criticized slow response to Hurricane Katrina. When the scale of the disaster became known, BP’s chairman made a comparison to “Three-Mile Island,” implying that this disaster could put a stop to petroleum as the 1970s disaster effectively froze the U.S. nuclear industry. And now, as the spill has become the worst environmental disaster in U.S. history, even the president’s supporters are comparing it to 9/11 – with “The World is Flat” author Tom Friedman and others making the case that Obama is squandering a historic opportunity to unite the country and possibly the world behind renewable energy.

Given that biofuels are the most direct substitute for the petroleum that’s central to the current crisis, they are likely to receive the most attention from politicians and citizens alike. Moreover, they’re a natural fit for the climate and the economy of the southern U.S. states directly affected by the spill: if Mendel’s 1,200 gal/acre yield claims hold true, Alabama farmers could replace their 360,000 acres of cotton (worth about $250 million at 850 lbs/acre yields and a price of $0.78/lb) with miscanthus, and convert it using technology being developed in neighboring states, like BlueFire’s* cellulosic ethanol biorefinery in Mississippi or DuPont Danisco’s 250,000 gal/yr cellulosic ethanol plant in Tennessee to produce 432 million gallons of ethanol (worth nearly $1 billion at today’s spot price of $1.98). Gulf-state algae companies like PetroAlgae* and PetroSun could get a political and economic boost with their potential to provide biocrude and biodiesel. The risk, however, is that many sketchy biofuel startups will reap millions of taxpayer and investor dollars as they use the oil spill catastrophe to opportunistically promote technologies that have no chance of ever working.

What’s the best path forward for the U.S. government? Despite his acknowledged missteps, Bush’s response to 9/11 provides useful analogies and ideas. At the bottom line, there’s the scope: the total cost of the wars in Iraq and Afghanistan is $2.4 trillion according to the nonpartisan Congressional Budget Office, which would amount to a pretty large check for cleaner energy. Where neither Bush nor his then-rival Kerry opted to tax gasoline to fund the war and invest in alternative fuels when gas prices cost half what they do today, Obama should seize the moment and push to tax carbon. A carbon tax would encompass not just oil but also the coal industry, which the recent mining catastrophe shows is also ripe for action. As Bush united 22 federal agencies ranging from Defense to Transportation to Treasury under the Department of Homeland Security (DHS), Obama should create a Department of Energy and Environment Security that unites overlapping and conflicting activities at the U.S. Departments of Energy, Transportation, and Agriculture, as well as the Environmental Protection Agency. The envisioned agency would also expand the Coast Guard, and totally overhaul the corrupt and ineffective Minerals Management Service – effectively absorbing it, as the DHS absorbed the Immigration and Naturalization Service. And as Bush invested in developing and deploying new airport security technology like terahertz scanners, the country needs investment in developing and deploying new technology like biorefineries, bioremediation, and other alternative fuels (such as coal-bed methane) in development by startups like Luca, Taxon, Ciris, Profero, and in an ironic rhyme, by Synthetic Genomics in collaboration with BP.

* Client registration required.

To read more insights from Lux Research analysts visit Lux Populi.

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BP oil spill continues to provide opportunities for new technology applications

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It has been over two months since British Petroleum’s (BP) Deepwater Horizon offshore oil rig exploded, creating a massive oil spill along the Gulf coast. Earlier, we discussed BP’s use of Corexit, a chemical that breaks down the oil slick for bacterial consumption, or sinks it into the water to prevent it from reaching the shore. In that discussion, we noted Corexit’s potential health risks to humans, as well as marine life and water fowl.

Critics of how the massive oil slick has been handled so far have noted the technologies deployed to counter it are the same technologies used for the last several decades. Though many new technologies offer alternatives, many hurdles remain before a complete solution is found.

Part of the slowdown in adopting new technologies for this spill is that the process for vetting them requires analysis and approval from BP, the U.S. Coast Guard, and the Environmental Protection Agency (EPA), as well as other U.S. agencies. With the U.S. government taking charge it is unclear whether we can expect further “red tape” delays. The one silver lining is that all parties involved are entertaining the flood of new ideas and suggestions coming into the help lines – even those in the early stages of field testing – which could provide a potential market for a myriad of new technologies.

In the last several weeks many new technologies, especially companies with non-chemical water treatment technologies, have tried their hand at solving the problem. For example, Ecosphere Technologies has already gained approval from BP and is awaiting approvals from government agencies to deploy its Ozonix Systems, which uses an advanced oxidation process for water treatment. In an interesting convergence, actor Kevin Costner – star of the post-apocalyptic movie Waterworld – has privately funded the development of a centrifugal device with Ocean Therapy Solutions, which BP has approved for testing on the oil spill. The technology separates oil from water, stores it in tankers and returns purified water back to the gulf. John Houghtaling, chief executive of Ocean Therapy Solutions, claims that the largest of his company’s machines can separate oil from water at a rate of 200 gallons per minute.

Meanwhile, other companies fielding clean-up technologies – like MyCelx, AbTech Industries, and Gradek Energy – have since moved away from treating oil spills because of the approvals barriers. However, the Deepwater Horizon spill is also providing opportunities for software solutions and sensor technologies that help guide clean-up efforts. Software technologies that track the movement oil spills have an easier path into this market because they provide ongoing monitoring capability with lower capital costs, and we expect minimal regulatory hurdles given the nature of the services.

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