Heavy R&D from big oil and government led to
over-optimism on commercialisation date

By Cath Everett

BusinessGreen - 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.