What, When Is Payoff for ‘Green Crude?’

For scientists and botanists, algae are among the world’s most basic organisms. Most species are tiny, energetic photosynthesis machines. For investors, algae, and the companies trying to harness its powers and potential, present a range of possibilities. “Algae are fascinating,” said Peter Park, an analyst with Park West Asset Management who is closely watching the progress of small companies focused on commercially farming algae for use as a biofuel. The big question about algae for investors remains: how good are the new technologies and how far away is the payoff?

The big company names like Exxon, Chevron and Sapphire Energy, to name a few, have taken an interest in algae, sometimes called “green crude” for its promise as an energy producer. But these companies are primarily investing in “open pond systems” for producing algae that have limited yields. It is the few, tiny, development stage companies that are doing the most interesting, albeit mostly untested, thinking on the potential of algae as a source of alternative energy.

Los Angeles-based OriginOil Inc. (OOIL.OB, http://www.originoil.com/ is attempting to patent a technology called Quantum Fracturing that increases CO2 absorption in the algae, allowing the cell to produce a greater volume of hydrocarbons. The company, which was recently named one of the 30 companies with “transformative technologies Biofuels Digest, hopes to ultimately license the technology to refiners and others and announced its first customer, Australia-based MBD Energy, in May. The stock trades relatively well (average daily volume is more than 183,000 shares) but its price is languishing at around $0.25, off its $52-week high of $0.40.

Scottsdale, AZ-based PetroSun Inc. (PSUD.PK, http://www.petrosuninc.com), formerly PetroSun Drilling, is focused on production of biodiesel because “it can be used in existing diesel engines, which relieves manufacturers from making costly engine modifications,” according to the company website, as well as the fact that it can be mixed with conventional petroleum diesel. But the stock has plummeted down to rock bottom $0.03 and is not trading.

U.S. and Perth, Australia-based *Algae.Tec Ltd (http://algaetec.com.au) is focused on a unique algae production system to produce algae for the production of biofuels and animal feed, among several other uses. The company, which has an algae development center just north of Atlanta, has created a technology called the McConchie-Stroud System (after two of the founders) that uses a 40-foot shipping container as a totally controlled environment to promote photosynthesis and drive algae production 10 times greater than an open pond system. These containers are stackable and mobile and can be situated virtually anywhere. The Company has just released its prospectus and plans to go public on the Australian Stock Exchange (ASX) sometime this summer and have a demonstration container operational by February 2011. 

Melbourne, FL-based PetroAlgae (PALG.OB, http://www.petroalgae.com) licenses a commercial, open pond “micro-crop” technology system that enables the production of green diesel as a renewable fuel as well as protein for animal feed and human supplement. The renewable fuel component is functionally identical to traditional petroleum products (diesel, jet fuel, gasoline) and can be “dropped into” existing petroleum distribution channels. Its stock price has bounced between $6-$40 over the past year (it went public at $3 a share in 2008) but trades only sporadically and has been hit hard in the recent market downturn.

* Denotes Allen & Caron client.


2 thoughts on “What, When Is Payoff for ‘Green Crude?’

  1. Hey great article! I have recently wrote an article that discusses the progress made by two algae bio fuel companies. Check it out! New Technology goes through three stages:
    First it is ridiculed by those ignorant of its potential
    Next, it is subverted by those threatened by its potential
    Finally, it is considered self-evident.
    This article is in response to an Oil Drum article linked below.
    Take a look at the article to get a good understanding on how I shaped my response.
    The Oil Drum article may have been relevant when published back in may of 2009 but many of these limitations have and will be overcome by advances in technology, along with increases in private and public investments.  With global investment in carbon capturing in the billions, the race has been set to see which companies can emerge as technology leaders.  The companies that do succeed will only realize success when they integrate their technologies with one another to create a superior technology.  These integrations will help push the industry forward and eventually will create a paradigm shift in carbon capturing. 
    The scenario for success I just explained, closely resembles Origin Oil and MBD Energy’s current relationship.  Many are ignorant and threatened by the potential of capturing carbon to produce biofuel, they simply say “It can not be done.”   Step one and two regarding phases of new technology complete.  The oil drum article vaguely communicated to readers the failure of Green Fuel and with Green Fuel’s failure tried to subvert their audience into believing if one fails, they all fail!  This notion that if one fails all fails holds very little weight.  Present day knowledge and opportunities to turn carbon into a viable fuel source has become self evident.  
    When a technology becomes self evident it has reached it’s final stage, commercialization.  This stage has been evolving the past year with major R&D projects being funded by the largest publicly traded oil companies in the world.  Bp, Shell, Royal Dutch and the biggest investor of them all Exxon Mobil are all in the race.  The big boys now consider these technologies self evident and see the need to invest in order to secure their competitive advantage amongst one another.  It is only a matter of time before we see the first industrial scale carbon capturing plant that can produce algae as a biofuel.  In my opinion MBD Energy and Origin Oil, through the integration of their technologies, will be the first to achieve this amazing feat.
    Origin Oil’s market strategy is unique because they look to integrate their technologies with other thriving companies to establish a competitive advantage.  They were voted by BiofuelDigest.com top 30 most transformative technologies in 2010. Their  portfolio consisting of 10 patent pending technologies are crucial to their success and are regarded to as industry game changers. CEO Riggs Eckleberry and CTO Dr. Brian Goodall combine for over 50 years of networking and industry experience. Origin Oil’s ability to create synergy between them selves and existing biofuel companies by integrating technologies will serve them well in the long run. This unique market entry strategy will drive their industry growth and will enable them to become industry leaders in technology innovation and integration.

  2. Pingback: Lufthansa puts serious money on Australian algal fuel technology | privatelimitedcompany.net

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s