Jul. 15--Of all the materials out there to make biofuels, algae caught Exxon Mobil Corp.'s eye, prompting the oil and gas giant to take a $600 million plunge into developing biofuels that help reduce greenhouse gas emissions.

"This is not going to be easy, and there are no guarantees of success," said Emil Jacobs, vice president of research and development at the Irving-based company.

On Tuesday Exxon Mobil announced an alliance with La Jolla, Calif.-based biotech company Synthetic Genomics to study and develop next-generation biofuels that aren't derived from food crops, as corn ethanol is. Exxon Mobil is putting up $600 million, half for internal costs and the rest to Synthetic Genomics, to make fuel from algae.

He said Exxon Mobil considered other biofuel sources but zeroed in on algae because the company deemed it most likely to be produced economically on a massive enough scale to matter in the world's future energy mix.

"The single biggest issue in the application of any kind of biofuel is the scalability, the economic scalability," said J. Craig Venter, CEO of Synthetic Genomics.

Venter said such scale isn't possible without the oil industry's participation, and Exxon Mobil's financial and scientific heft can help "scale up this commodity to make it economically viable."

Jacobs said Synthetic Genomics brings its expertise in the study of organisms and synthetic biology, while Exxon Mobil provides engineering, process scale expertise, financial strength, and oil and gas industry knowledge.

Divya Reddy, a biofuels analyst with Eurasia Group, said Exxon Mobil's move is part of a broader trend of oil companies taking stakes in biofuels ventures, particularly next-generation projects.

"Exxon Mobil is kind of the last one to jump on this bandwagon, but this sort of solidifies that trend -- even if companies are heavily focused on oil, they are aiming to diversify," she said.

Other oil majors have long invested in biofuels, including Chevron Corp., Royal Dutch Shell and the biggest spender on alternatives, BP.

Earlier this year BP unveiled a joint venture with Cambridge, Mass.-based Verenium to develop and commercialize cellulosic ethanol, produced from wood, grasses or the nonedible parts of plants.

Driving the effort is a 2007 energy law's mandate to blend 36 billion gallons of biofuels into the nation's fuel supply by 2022.

But Exxon Mobil remained reluctant about investments in alternatives and renewables because most require government subsidies to be profitable. The company's position has generated heat from environmental groups and some shareholders, including descendants of John D. Rockefeller, founder of Exxon predecessor Standard Oil.

Fadel Gheit, an analyst with Oppenheimer & Co., said that increased public pressure may have pushed Exxon Mobil to examine biofuels. He said it's doubtful that the investment will affect the bottom line of a company that earned $45 billion in profits in 2008, but "it's very prudent, and one should not close any door."

Reddy noted that algae is the least developed of biofuel options but probably has the most promise, "especially in terms of yields."

Algae needs sunlight but doesn't require fresh water or large swaths of arable land to grow. It also feeds on carbon dioxide, a greenhouse gas. Placing algae ponds or factories next to coal-fired power plants, refineries or other industrial polluters could feed the algae while reducing carbon dioxide in the atmosphere, Jacobs said.

He said the $600 million investment is intended to take the project to the go/no-go stage, where Exxon Mobil will consider what's been accomplished and decide whether to commit billions more.

But actual full-scale commercialization -- processing biofuel at refineries so it can be transported to retail gas stations -- is at least five to 10 years and billions of dollars away, he said.

kristen.hays@chron.com

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