Heavy R&D from big oil and government led to over-optimism on commercialisation date
The head of Royal Dutch Shell has said that second-generation biofuels are unlikely to be in widespread commercial use for another decade despite a strong research and development focus from both companies and governments.
Peter Voser, who took over as chief executive of the oil company from Jeroen van der Veer in July, told the Financial Times it would be a number of years yet before a commercially proven plant was operational.
The firm has more ongoing projects in the area of second-generation biofuels than any of its rivals and Voster claimed that it was 18 months ahead of them in terms of its research into biodiesel made from algae. The reference was targeted particularly at ExxonMobil, the biggest US oil company, which has just launched a high-profile TV advertising campaign about its algae research.
Other second-generation biofuels include cellulosic ethanol, which is made from plant waste such as wood chips or straw. Such products are currently considered less controversial than first-generation ones, which have been linked to food price inflation, deforestation and a questionable performance in terms of reducing carbon emissions.
Shell has been one of the most vocal advocates of second-generation biofuels among big oil and has argued that subsidies and regulation to encourage R&D should be reformed in favour of products that cut emissions. It currently believes that all biofuel production is supported indiscriminately no matter what the environmental impact.
But the company has been pruning back its own portfolio in the area and has acknowledged that it was previously over optimistic as to when such ventures would start generating a return.
It recently sold the stake it took in German firm Choren in 2005, which is developing a process to create gas from wood chips before converting the gas into diesel. At the time, Shell said it expected commercial production to start in 2007, but it is now scheduled to begin next year.
Moreover, in 2004, Shell had said that its Canadian partner Iogen was already commercially producing the world’s first cellulose ethanol fuel from straw using enzymes. Voser is now warning that such second-generation ethanol fuel is unlikely to be in widespread commercial use before 2020.