As Biofuels Lose Some Luster, Sapphire Goes Long with Sinopec Deal

7/10/14Follow @bvbigelow

In a ceremony held Thursday in Beijing, San Diego’s Sapphire Energy and Sinopec, China’s state-owned oil and gas conglomerate, agreed to work together to develop and produce algae-based biofuels in China.

“The goal is to build a large demonstration facility here with Sinopec,” Sapphire spokesman Tim Zenk said last night from Beijing in a phone call that preceded the ceremony. “We believe this will help us continue to validate what we have accomplished in New Mexico.”

Sapphire said last year that it was beginning year-round production of algae-based “green crude” at its 300-acre commercial algae farm and bio-refinery near Columbus, NM. Establishing a similar plant in China should enable the company to substantially lower its production costs.

Sapphire-Energy Algal Biorefinery near Columbus NM It might even prove crucial for Sapphire, as the biofuels industry has lost some luster in recent years; fracking has substantially lowered the cost of conventional petroleum production in the United States, where government policies also are buffeted by contrary energy interests.

Sapphire Energy and Sinopec were among six new U.S.-China partners formally selected for a flagship EcoPartnerships Program during a signing ceremony in China’s Hall of the People in Beijing. The program is intended to promote cooperation between U.S. and Chinese interests on clean energy, climate change, and environmental protection.

U.S. Secretary of State John Kerry has been meeting with Chinese leaders as part of a formal “Strategic & Economic Dialogue,” and attended the proceedings with Yang Jiechi, a foreign policy councilor for the People’s Republic of China. The event was likely a relief, following closed-door sessions Wednesday to discuss conflicts over Chinese territorial claims in the South China Sea, Chinese hacker attacks on U.S. computer systems, climate change, and other tension-inducing subjects.

While there was no agreement on reducing greenhouse gas emissions, The New York Times reported today that Chinese leaders seemed more determined to curb pollution, which has gotten so bad that some Chinese leaders see it as a possible cause of political instability. If true, such a shift would create a more receptive climate in China for adopting more sustainable energy technologies.

With over $445 billion in annual revenue and nearly 369,000 employees, Sinopec is ranked as No. 29 on the 2014 Forbes Global 2000 list of biggest companies. Working with a “super-large, integrated oil company” in China is key to Sapphire’s efforts to produce algae-based biofuels at a large scale and at low cost, Zenk said. And gaining government support for business partnerships is essential to working in China.

In a statement released overnight, Sapphire said, “Together, we will demonstrate that crude oil from algae can be produced with favorable economics; that it can be integrated into existing fuels distribution networks; and that it will deliver substantial advantages for the reduction of CO2 emissions in both nations.”

In a report this morning in BioFuels Digest, Editor Jim Lane wrote that new economic realities (i.e. fracking) have forced cutbacks at Sapphire and throughout the biofuels industry:

“To right-size for the future and frankly to conserve cash and remain strong in a dollar-starved investment climate, Sapphire downsized in recent months, shedding 50 of its workforce. A lot of that was in engineering; the science team was kept largely intact. It’s a move that the Top Guns in algae are all going to have to make to raise money in this environment.”

Asked to confirm the layoffs and to respond, a spokeswoman for Sapphire Energy wrote this morning:

“It is true that there has been realignment and changes at all levels of the company, and Sapphire has taken the opportunity to reduce its capital requirements while still developing the technologies they have been working to deploy.

“The reality is that since they started the company, market conditions have changed significantly, making it increasingly difficult for biofuel producers to compete with the incumbent oil companies.

“Specifically, the on-again off-again policies for renewable fuels in the U.S. have greatly affected the industry’s ability to compete on an open and fair basis with traditional fossil fuel producers. These threats to U.S. biofuels at the policy level coupled with the recent introduction of new crude oil supplies in the U.S. have led to an overall unease in the investment community around biofuels and the rapid decline in investment capital for the industry. So, the company acted as needed at this time.”

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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  • Ray Del Colle

    “Carbon dioxide has increased about 40 percent in the atmosphere since the 1750s, due to pollution from dirty energy like coal, oil, and gas. The result is a warming climate.” http://clmtr.lt/c/JE40cd0cMJ