Siluria taps new CEO in the race to replace oil with natural gas, via biotech

LS9’s former CEO joins Siluria — “the first company to come up with an economical, practical way to turn natgas into liquid fuels and chemicals”.

In and around the world of money, there is the concept of an “investment thesis” — and to the extent that a news service guide by a thesis, our coverage is based in a contention that biotechnology will transform the chemistry of the future — making it possible to produce fuels and chemicals in innumerable applications with a combination of transformatively different geographies and costs.

This week marks the 70th anniversary of the formation of the Oronite Chemical Company as a subsidiary of Standard Oil of California (now, Chevron). At the time, SoCal president H.D. Collier noted that “the chemistry of World War II is largely based on the by-products of petroleum, as the chemistry of of World War One was based on the by-products of coal,” and noted that Oronite’s technologies would open up a vast array of opportunities in the postwar world.

Not wrong there.

So, the Digest’s investment thesis takes a view that the build-up in oil prices — arising in 1973 out of geopolitics but driven more intensely today by the rise of industrialism in the developing world — inevitably has and will continue to spur a new class of biotechnologies that can unlock the value in alternative feedstocks.

To a great extent, we cover the transformation of biomass as a target feedstock, but we have continued to cover the emergence of natural gas.

The natural gas opportunity and the biobased angle

It is one thing to have a low-cost and abundantly available feedstock, as natural gas has demonstrably become in the North American market. Municipal solid waste is low-cost and abundant, too.

Although widely abundant, natural gas today primarily gets consumed as a direct fuel to generate heat for power plants or buildings. By contrast, oil is transformed into a myriad of transportation fuels, plastics, and high-value specialty materials. Partly as a result of their vastly different applications, a significant and widening gap has emerged between the prices of oil and gas.

What unlocks the value? The development of affordable applications that transform the low-cost feedstocks into high-value products.

Siluria and its technology

Another significant chapter in that narrative begins this morning with the news that Siluria Technologies named Ed Dineen as the company’s new CEO. Dineen, who was COO at LyondellBasell, one of the world’s largest fuel and chemical producers with over $45 billion in annual revenue and over 58 manufacturing locations in 18 countries, is best known to Digest readers as CEO of LS9 from December 2010 to earlier this year.

Siluria uses biocatalysis to transform the methane component of natural gas into ethylene or other longer-chain, high-value hydrocarbons like jet fuel, gasoline, or aromatic chemicals — based ultimately on work that originally came out of Angela Belcher’s biomolecular materials lab at MIT (now, there’s one to watch – more about her, here).

With Siluria’s biocatalysts, metals and metal oxide crystals are grown on biological templates — allowing unique ways to manipulate the surface of catalysts as they enable the chemical reaction necessary to transform methane.

Why is this important? It provides a path to resolving the problems of a technology called the oxidative coupling of methane – a real mouthful which is generally known as OCM.

OCM is a process that converts methane into ethylene – transforming a $200 per tonne molecule into the most widely-produced chemical compound in the world (109 million tonnes last year – and rising fast), currently selling for around $1200 per tonne. Glad Wrap, for example, is the polymerized version of ethylene. Plus, plastic bags, bottles, boxes, containers, pens, and on and on.

So valuable, in fact, that the price of ethylene makes it unusable as a transportation fuel, despite the little known fact that you get about 50 percent better mileage on ethylene than gasoline, and the CO2 emissions are lower (NOX is higher, though).

The problem is that no one has been able to make OCM work on an economic basis – the catalysts just didn’t have the right selectivity or activity rates. After a great deal of excitement and research in the 80s and 90s, attention petered out.

Siluria’s technology? The metals coating the virus form a nanotube structure they refer to as a “hairball”, giving the catalyst a greater surface area, which enhances the reactions.  This conversion happens at temperatures 200 to 300 below current steam cracking methods, greatly reducing the energy needed by current technology to produce ethylene.

Siluria’s progress

The company has been producing ethylene— the world’s largest chemical market, exceeding $150B billion–with its catalytic process at lab/bench scale since early 2010 and in two pilot facilities since early 2012. It has achieved commercial ready targets at these levels. Siluria is currently designing a demonstration facility capable of producing hundreds of tons of petrochemical products per year.

Construction on the demonstration facility will begin in 2013 and it will become operational by late 2014. Siluria is already engaged in discussions with chemical and fuel producers about future joint ventures and commercial relationships.

“Siluria’s process uses about two-thirds less energy than naphtha cracking and substantially less than ethane cracking, the two primary ways for producing ethylene now,” Dineen noted. “So it will reduce overall emissions, substantially reduce costs — and it is much less capital intense. Because the process occurs at lower temperatures, you don’t need special metallurgy for factories. – so, it can be economically implemented at smaller scale.”

“Natural gas is the most abundant pure-source hydrocarbon in the world and Siluria is the first company to come up with an economical, practical way to turn it into liquid fuels and chemicals,” Dineen said. Siluria can lower costs for current manufacturers by integrating our technology into existing sites. We can provide a more capital- and cost-effective alternative to new capacity investments while expanding feedstock flexibility. I look forward to working with the team at Siluria on bringing this game-changing technology to market.”

The right partners

The company has been attracting, ahem, the right kind of attention for some time in Silicon Valley — last year picking up $20 million in its Series B financing led by the Wellcome Trust, joining Siluria’s founding investors Alloy Ventures, ARCH Venture Partners, Kleiner Perkins Caufield & Byers, Altitude Life Science Ventures, Lux Capital, and Presidio Ventures.

The bottom line

There are a handful of companies with robust biotechnology that has transformative opportunities in natural gas. LanzaTech, Coskata, Sundrop Fuels are three, in addition to Siluria. We suspect that ultimately INEOS Bio’s gas fermentation technology is applicable to methane, too — and Calysta Energy is heading down this path too, also with a biocatalysis approach.

So far, they form a powerful sextet — woking from the hottest group of technologies and a feedstock that has been dominating the energy headlines for some time because of its increasing availability and price.