Valero Energy Corporation (VLO), BP plc (ADR) (BP), Codexis, Inc. (CDXS): Why Big Oil Is Ditching Biotechnology

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Early last year Shell Oil Company quietly announced that it had built a drop-in biofuels facility using a thermocatalytic process licensed from partner Virent. It proceeded to cut direct ties with industrial bioenzyme manufacturers Iogen and Codexis, Inc. (NASDAQ:CDXS) , which many people believed were the front-runners for the company’s plans in biofuels.

BP plc (NYSE:BP) followed suit in October by canning a cellulosic ethanol plant in Florida. The biorefinery was expected to utilize biocatalytic technology from Verenium Corp (NASDAQ:VRNM), but decided to use the money on “more attractive investments”. BP plc (NYSE:BP) is still developing the technology, but plans to license it out to willing participants from now on. It is, however, the leading energy company backing Cool Planet Energy Systems, a developmental stage company building a modular thermocatalytic platform to produce carbon negative fuels from biomass.

Exxon Mobil Corporation (NYSE:XOM) went all-in on developing algae technology with Dr. J. Craig Venter’s Synthetic Genomics. A (brace yourself) nearly $600 million investment exploring the possibilities of industrial biotechnology’s holy grail turned sour earlier this year as the companies stated that the technology they were trying to develop is “probably further than 25 years away”. Ouch.

Foolish bottom line
When some of the biggest names in energy have less-than-stellar news to report about industrial biotechnology, it is easy to see why many investors are down on the industry. On one hand, you have to admire their efforts and acknowledge that they are making the safer investments. On the other hand, you could accuse them of being too focused on the short term.

Bio-based fuels and chemicals are stuck in a catch-22. The technologies need more funding to develop, but aren’t attracting funding because they need to develop. One day soon these sustainable petroleum alternatives will make it to the market. Hoping to catch the wave by investing in big oil companies may not be your best bet.

The article Why Big Oil Is Ditching Biotechnology originally appeared on Fool.com is written by Maxx Chatsko.

Fool contributor Maxx Chatsko owns shares of Codexis. Check out his personal portfolio, his CAPS page, or follow him on Twitter @BlacknGoldFool to keep up with his writing on energy, bioprocessing, and emerging technologies.The Motley Fool has no position in any of the stocks mentioned.

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