Shell reins back expectations
By Ed Crooks
Published: November 29 2009 19:49 | Last updated: November 29 2009 19:49
Advanced biofuels will not be in widespread use until about 2020, the chief executive of Royal Dutch Shell has said, puncturing hopes that they could be on the verge of a commercial breakthrough.
Peter Voser, who took over at the head of Shell in July, told reporters at a briefing last week that it would take “quite a number of years” before there is a commercially proven plant.
His assessment will damp expectations that advanced “second generation” biofuels will soon be able to make a significant contribution to the world’s fuel supplies, even though they have received heavy research and development support from Shell and other companies, as well as from many governments.
Championed by environmental groups only a few years ago as an effective way to cut greenhouse gas emissions, first generation biofuels, such as ethanol made from corn, are now widely criticised for their social and environmental impact.
They are generally agreed to have contributed to food price inflation, whether directly by using foodstuffs as raw materials, or indirectly by competing with food production for resources such as agricultural land and water.
They also have a questionable performance in terms of cutting emissions. Studies comparing first generation biofuels to conventional petrol and diesel have widely varying results, but sometimes show they actually create more emissions than fuels refined from crude oil.
Ethanol produced from corn in the US, and biodiesel made from palm oil grown in plantations that were previously occupied by tropical forests in Indonesia, are especially likely to raise CO2 emissions rather than cut them.
Second generation biofuels, including cellulosic ethanol made from plant waste such as wood chips or straw, and biodiesel made from algae, are intended to avoid those problems. They do not use food crops, or compete with food production. By using plant matter that would otherwise simply rot or be burned, releasing greenhouse gases into the atmosphere, and by consuming CO2 as they are produced, they should also be much more effective at cutting greenhouse gas emissions.
Shell has been well aware of these arguments and been one of the most vocal advocates of “second generation” biofuels among the big oil companies. It has argued that subsidies and regulations to encourage biofuels should be reformed so that they favour fuels that offer a greater reduction in emissions, rather than backing all biofuels indiscriminately.
Under Jeroen van der Veer, Mr Voser’s predecessor, Shell pursued a number of different approaches for developing second generation biofuels, giving it a greater portfolio of R&D ventures than any other big oil company.
Most of those ventures are still going. Mr Voser notes with pride that Shell is 18 months ahead of “other companies” in its research into algae; a reference to ExxonMobil, the largest US oil company that has recently been making much of its own algae research with high-profile TV advertising.
However, Shell has been pruning its portfolio. It recently sold its stake in Choren, a German company developing a process to create gas from wood chips and then convert the gas into diesel, which looks like a relatively high-cost way to produce fuel.
The company has also been forced to acknowledge that it has been over-optimistic about when these ventures will start to pay off. When Shell invested in Choren in 2005, there was talk that commercial production could start as early as 2007. It is now expected to start next year. As far back as April 2004, Shell said Iogen, the Canadian biotech company that is its partner in efforts to use enzymes to produce ethanol from straw, was “successfully producing the world’s first cellulose ethanol fuel available for commercial use” at its demonstration plant.
More than five years later, Mr Voser is now managing expectations by warning it is likely to be a decade before that second generation ethanol is in widespread commercial use.
Mr Voser’s cautious assessment is shared by Exxon, and by the International Energy Agency, the rich countries’ watchdog, which argues that if emissions from road transport are to be cut substantially by 2030, it is fuel economy and battery-powered cars such as hybrids that will have to do most of the work, not biofuels.
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