IHS Chemical Week

CHEM IDEAS

Will a Dip in the Oil Price Postpone the Move to Bio Raw Materials?

10:19 AM MST | January 9, 2009 | By ALEX SCOTT

Cast your mind back several months to July 2008 and you had a chemical industry struggling not with credit issues and the drop off in consumer demand but with an oil price of more than $147/barrel. Analysts from some of the leading investment banks were even talking up the prospect of a $200 barrel. That spike in energy and raw material costs for the chemicals industry forced many leading chemical companies to stop and take a closer look at the alternatives ie whether they could cost effectively manufacture their products using renewable bio raw materials such as those from crops. Some found they could and the likes of biotech companies such as Genencor, Genomatica (San Diego, CA), and Novozymes which have businesses based around the provision of biotechnologies such as the development of fermentation processes, had a positive 2008 on the back of it. Genencor for one signed three separate, multi-million dollar product development agreements with DuPont, Goodyear and Huntsman.

 

Both Novozymes and Genencor are involved in establishing key biotechnologies in areas such as the development of enzymatic processes for so called second generation biofuels in which not food crops but crop waste and other woody or cellulosic material are devoured by designer enzymes and converted into biofuel. The companies’ biofuel technologies are on track to be phenomenally successful in their technological capability. However, the drop off in the price of oil to its current low of around $47/barrel is a potential stumbling block for this and a wide range of other bio projects.

 

In a recent interview with Genencor CEO Tjerk de Ruiter, to be aired in CW in the coming weeks, Tjerk explained to me that Genencor’s processes will still be economically viable at a crude price of $50-$60/barrel. “If oil drops to $40 then no doubt our projects would be very difficult,” he says. As de Ruiter also says the current low price of oil is a temporary situation – and manufacturing facilities that Genencor is investing in on the back of deal agreed in 2008 will not be up and running until 2013 when the world will almost certainly be a different place and oil may again be expensive.

 

The question is ‘how long is temporary?’ If the price of oil hangs around at its current level for the next three years - or the time it takes to bring in a Genencor and have them replace your petrochemical process with a new bio process and build a plant to produce it - then the shift from oil to bio will undoubtedly be slowed.













 
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