STRANGLED IN THE CRADLE? A Major Petroleum Company Threatens the Biodiesel Industry?

Last week I got an email from a biodiesel consultant who prefers to be unnamed. We spoke subsequently, and he alerted me to a story which no one seems to be covering, but which I deem to be of some significance and which could have major implications regarding the future well being of the still very young biodiesel industry.

The threat is coming from an old line petroleum industry firm calling itself UOP which stands for Universal Oil Products. Formerly a research lab maintained by a consortium of oil exploration firms, UOP is nearly a century old and is essentially a licensing and design engineering firm today and holds patents on literally thousands of processes relating to oil refining. UOP is now owned by Honeywell.

UOP, like most of the major firms involved in oil refinery engineering at present, is active in alternative fuel research as well. In fact, they’ve established a new division devoted to perfecting technologies for producing petroleum analogs from renewable sources.

UOP has authored a lengthy paper on their researches entitled “Opportunities for Biorenewables in Oil Refineries" which was submitted to the Department of Energy, and was provided to me by the consultant. It makes for some very interesting reading.

In it the company alludes to several experimental biofuel production techniques of which I was dimly aware previously, but which I assumed were a long way from commercialization. If what UOP is saying is true, at least some of these techniques may be poised to challenge both biodiesel and ethanol, the up and coming biofuels in the U.S. and in many parts of the world.

UOP uses the terms “green diesel” and “green gasoline” to refer to products resulting from its improved production processes. These terms are fairly apt because the products are much closer in chemical composition to refined petroleum products than are biodiesel and ethanol which may properly be considered petroleum substitutes rather than petroleum analogs.

Green diesel starts with the same basic feedstock as biodiesel, namely fats from plants or animals, but instead of purifying the fat and mixing it with methanol to produce methyl ester, UOP employs oil refining technology, a combination of catalytic cracking, hydro-cracking, and hydro-treating, and the company suggests that such fats can be co-processed with crude petroleum or refined in slightly modified petroleum refining equipment. Green diesel represents a middle distillate while green gasoline is a lighter fraction.

UOP’s claim is that green diesel can be manufactured with the improved process for approximately half the cost of manufacturing biodiesel. If that’s true, the process is a real breakthrough, and one that could revolutionize the biofuels business.

So why did UOP assail the Feds with this rather dry scientific paper if they already enjoy a big cost advantage? Why would they need to lobby Congress, which is presumably what they’re doing, if that were the case? Because they want the same subsidies currently enjoyed by the biodiesel guys. And this is spelled out explicitly in their paper.

My source told me that the biodiesel community is terrified, and he suggested that I might want to pen an editorial denouncing UOP and suggesting that Feds refuse to subsidize them while continuing to prop up biodiesel. Frankly, I have a problem with that. I realize that a trade publisher is expected to serve as a cheerleader for the particular industry he or she is covering, and, at the same time, I confess to being somewhat enamored of biodiesel. I like the entrepreneurial spirit of the business, I’m impressed by the niche marketing efforts of some of the vendors, and I have a soft spot for a lot of the old hippies who seem to have drifted into biodiesel. I like Willie Nelson too. But if UOP can really make a better product for a lot less money, is the Federal Government obligated to support a plucky little industry of upstarts, dreamers, and entrepreneurs making a more expensive product? And am I obligated to trash the scientific efforts of a company simply because it’s in bed with Big Oil?

UOP may in fact be blowing smoke about the maturity and cost effectiveness of its processes. Almost every day I read some press release about some breakthrough in alternative fuel production techniques that’s supposed to usher in the end of the petroleum age and then that’s the last I hear about it. This could be more of the same.

Even if what UOP is saying is perfectly true, I see green diesel facing some of the same major problem as biodiesel, namely cost of the feedstock and the unwillingness of farmers to cultivate low cost fuel crops like the Chinese tallow tree. The high cost of feedstocks relative to the cost of fossil fuels has always been the showstopper for biofuels, and it will continue to be until someone in the farming community steps up to the plate in respect to fuel crops.

UOP and Bio-crude

UOP, it turns out, has more than low cost green diesel and green gasoline up its sleeve. It has also has a new process for converting pyrolysis oil or bio-crude into gasoline.

Bio-crude is a nasty, dark brown fluid that you get when you vaporize biomass derived from plants. Almost all of it produced to date has been burned on the spot for process heat or motive power. It has approximately the same heating value as residual oil from petroleum, but it’s full of acids, water,and metals, as well as a bunch of different hydrocarbons that vary according to feedstock and the pressure and operating temperature of the pyrolysis reactor.

Bio-crude can be cracked and hydro-treated to produce synfuels resembling diesel oil, kerosene, and gasoline, but heretofore the economics of the overall process have never looked very good, though pyrolysis itself exhibits good conversion efficiency. Now UOP claims to have a solution.

Bio-crude itself contains three fractions, a form of liquefied lignin, a water fraction, and an oil fraction. The lignin, it turns out, is very close to gasoline already, consisting of a lot of short chain hydrocarbons linked by oxygen molecules. By hydro-treating the lignin, you can break the oxygen bonds and fuse the oxygen atoms with hydrogen to form water. And you can derive hydrogen at fairly low cost from the water fraction using a process developed by a company called Virent, a hydrogen startup. Voila! Gasoline from wood waste.

Again, there’s no independent confirmation that UOP’s process works as indicated. Indeed, my source suggested that the whole thing was a monumental ruse to enable the oil companies to crush biodiesel. In his scenario they would simply begin processing biofuels at their facilities irrespective of the cost, absorb the losses, which they could well afford to do, and drive the biofuel companies out of business.

I can understand the paranoia, but the fact is that major oil companies have invested huge amounts of money in alternative energy ventures of various sorts and have made money on many of them. Only one oil company, namely Exxon-Mobil, is openly hostile to alternative energy, and their attempts to convince the general public that global warming is junk science and that alternative energy is unnecessary have been a monumental failure. In fact, alternative fuels have enjoyed tremendous growth over the past decade. Why not try to get a piece of it if you’re already in the fuel refining business?

What It All Means

UOP has been pursuing this project for some time and their last press release relating to it was from the end of last year. What’s new is the consternation of the biodiesel community which surfaced in the recent biodiesel conference in San Antonio.

So is it warranted? I would say that the UOP project is definitely something to watch. I have long believed that synfuels, that is petroleum analogs, hold an edge over other biofuels simply because they can be so easily substituted for refined petroleum products. If you can make a synfuel out of the same feedstock you’re using for biodiesel or alcohol and you can do so more cheaply, you enjoy a big advantage. But as I say, UOP may be overstating their case. Only time will tell.