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Exxon Mobil Corporation (XOM) Discovers What Solazyme Inc (SZYM) Already Knew

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Several years ago Exxon Mobil Corporation (NYSE:XOM) and Synthetic Genomics (SGI) attempted perhaps the largest and most ambitious photosynthetic algae project in history. The goal: grow algae in large-scale, open runways or ponds using nothing more than carbon dioxide and sunlight. Oh yeah, and bring algae-based fuels to cost parity with petroleum fuels by 2019. Exxon Mobil Corporation (NYSE:XOM) played the role of financier — cutting checks totaling $100 million to date with plans for an additional $500 million — while SGI played the role of world-renowned and crazy-but-onto-something synthetic biology firm.

Exxon Mobil Corporation (NYSE:XOM

The two scoured the globe (literally) for naturally occurring algae strains, or wild-type strains, in hopes of finding one with commercial potential. Unfortunately for those wishing the project to success, the partners announced that wild-type photosynthetic algae just didn’t produce enough feedstock quickly enough for economical products — even with minor changes to their genomes. The two will now utilize synthetic biology to realize their goals. Ironically, Solazyme Inc (NASDAQ:SZYM) discovered these very same pitfalls over one decade ago. So how did these companies not see failure coming?

Told you so
Before you think “I could have told them that and saved them $100 million”, you should know that the Exxon Mobil Corporation (NYSE:XOM)-SGI project was really a mining operation above all else. The head of SGI is none other than Dr. J. Craig Venter, who famously led the privately funded arm of the Human Genome Project and created the first completely artificial living organism. So while the project itself failed to bring us algae-based fuels by 2019, Venter now owns a treasure trove of diverse genetic material for building a successful microbe to get the job done. This was a major goal all along.

In the early days of Solazyme Inc (NASDAQ:SZYM), founders Jonathan Wolfson and Harrison Dillon tried their hand at open pond technology. They quickly learned that would be a difficult endeavor and switched their focus from photosynthetic algae to heterotrophic algae, which grow in the dark by fermenting sugar. Imagine being the venture capitalist at that meeting (“yeah, so we’re going to change everything”)! The company also employs heavy doses of genetic engineering to alter the metabolism of its microbes to produce the numerous tailored oils of its platform.

Why didn’t Exxon Mobil Corporation (NYSE:XOM) and SGI employ this from the beginning? Perhaps they were looking for the quickest route to commercialization (engineering a microbe requires more overhead), but they now presumably have an advantage in terms of genetic tools to work with.

What this announcement doesn’t mean
It is important not to take the wrong thing away from this announcement. Some news outlets are failing to make the distinction between wild-type algae and genetically altered algae, instead claiming that algae-based fuels are dead. That simply isn’t true.

Companies such as Algenol (photobioreactor bags), Sapphire Energy (open ponds/runways), and Joule Unlimited (photobioreactors) are just some of the firms making progress. Algenol recently hit ethanol yields in excess of 9,000 gallons per acre (link opens PDF) — compared to 400 gallons for corn and 800 gallons for sugar cane on the same basis. Sapphire Energy is churning out Green Crude at the world’s first commercial demonstration facility, which will initially produce 1 million gallons of finished petroleum products per 100 acres. And Joule Unlimited wields the Helioculture platform (my favorite industrial biotech platform) that combines photosynthetic microbes with modular systems. That should allow the company to achieve the scale of an open pond with the finesse of a closed bioreactor.

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