From Wisconsin we have huge news from Virent, which has appointed one of Shell New Energies’ gurus, Stacey Orlandi, as Virent CEO, succeeding Lee Edwards who is headed into retirement after a distinguished 8-year run. Most recently, Orlandi was Shell’s VP, Technology for Novel Processes and New Energies.
Orlandi’s mission? To commercialize Virent’s technology for the large scale production of renewable fuels and chemicals.
The Beyond Petroleum generation redux
Over the years, we have noted the number of BP execs from the John Brown era — the days of Beyond Petroleum — that are playing a key role in the commercializing biobased technologies. Orland is another, having served for a number of years over at BP including a stretch as Cherry Point Refinery Manager, Refining Technology Development Manager and Refining Supply Manager. Tesoro executive VP CJ Warner is also a BP veteran, as well as Lee Edwards, who once headed up BP Solar. Not to mention that Advanced Biofuels Association president Mike McAdams served a humber of years in the Brown-era policy unit.
Just to make the circle fully complete, it wasn’t too long ago that Shell was the primary investor in Virent and the focus then was almost entirely on fuels. As other investors arrived, such as Coca-Cola, the focus expanded “beyond fuels” and into the world of chemicals.
It’s a brilliant addition, really, a coup for Virent. But the industry will miss George Leland Edwards — a steadfast and thoughtful leader who steered Virent safely through turbulent years from the global economic crisis to the oil price debacle — and a distributed former chairman of the Advanced Biofuels Association.
The Virent backstory
Today, Virent is a wholly owned subsidiary of Tesoro Corporation. The company is creating the low carbon fuels and chemicals the world demands using a wide range of naturally‐occurring, renewable resources.
As we reported in last September, Tesoro reached an agreement for Tesoro to acquire Virent. The acquisition, the partners said, will support the scale up and commercialization of Virent’s BioForming technology for the production of low carbon bio-based fuels and chemicals. As a result of the acquisition, Virent will become a wholly owned subsidiary of Tesoro and remain in Madison, Wisconsin. In late 2015, Virent had been named the #1 Hottest Small Company in the Advanced Bioeconomy by the readers and invited selectors in the Digest’s Hot 40.
The companies had initiated a strategic relationship in January 2016, and have worked together to establish a forward plan to scale-up the technology and reduce deployment risks to meet the increasing demands for high quality, renewable fuels and chemicals.
Stars of the Virent Galaxy: Coca-Cola, Toray, Johnson Matthey, Tesoro
They call it a strategic consortium aimed at commercializing Virent technology, and it’s Coca-Cola, Toray, Johnson Matthey, and Tesoro.
The Prime Objective? To develop the first commercial production facility for the BioForming process. Individual members will contribute to that effort through technical and engineering assistance, infrastructure, supply chain support and/or product off-take commitments. The Consortium will work jointly to develop the scale up strategy, including the size and location of the first plant, which will be underpinned by fuel and chemical offtake commitments.
As Lee Edwards told the Digest earlier this year, “ no one entity can pull it off. It’s a consortium for commercialization of both fuels and chemicals, something that Tesoro was a part of before the acquisition. In includes Toray for polyester films and fabrics, Coca-Cola for PET packaging, and at the heart of it there is Johnson Matthey providing catalyst technology process, project support and the manufacture of catalysts.
The JM role? De-risking the technical aspects. Meanwhile the partners conduct regular steering committee meetings and leverage support from the their respective communities — not to mention the large JM community in the US and UK.
Fuels vs Chemicals
Probably the wrong way to think about it is whether the company will produce fuels or chemicals. Think that fuels are providing a strong pull while chemicals are providing the financial lift to provide the margins at scale.
A few years ago, when crude was at $110 and chemical companies were avidly exploring alternative supply, there was more pull coming from the chemical side than today. Fuels offer a natural hedge through the Renewable Fuel Standard — as oil prices drop, credits within the RFS system increase in value, counter-cyclically. There’s no equivalent elegantly-designed support on the chemical side — biobased chemicals are fully exposed to the oil price slump.
When will Virent reach commercial scale?
Achieving steady-state operations with a commercial-scale plant? Our best estimate would be “the end of 2021”. Between now and then, think capital-stacking offtake agreement signing, and a finalized design.
Tesoro operates in the West — California is a gigantic part of its financial base. And California has re-adopted the Low Carbon Fuel Standard with more aggressive targets. Low carbon fuels may be in retreat in the EU, but they are on the march in California, and Tesoro has decided strategically to serve the evolving needs of its customer base rather than fighting the future.
We’ve seen exotic blends for Virent fuels in contemplation, as high as 45%. That would certainly completely change the path to compliance under the LCFS and also the Renewable Fuel Standard. The national US target of 36 billion gallons of ethanol-equivalent fuel, which looks highly infrastructure challenged.
It may come down to the sourcing of the sugars that Virent uses to make fuels. Conventional first-gen sugars are pricey and the hydrocarbon yields sink well below 50% when all the oxygen is removed from a sugar molecule. It gets hard to make an affordable gallon of hydrocarbon fuel starting from a 15 cent sugar. 5 cent, 10 cents — that’s the world of cellulosic sugars — and we may well see that the advent of those will unlock a big future for Virent.
The Beyond Fuels product set
But it’s much more than a fuel story, as we have noted.
In April 2016, we reported that Virent’s BioFormPX paraxylene was used in the world’s first 100% plant-based polyester shirts, demonstrating the potential of bio-based polyester for production of garments and textiles. A key raw material for the production of polyester is paraxylene, which today comes exclusively from crude oil. Virent’s technology produces BioFormPX paraxylene from plant-based materials, resulting in much lower greenhouse gas emissions. Virent worked with Far Eastern New Century (FENC) to produce the bio-polyester fabric.
The Plant Bottle projects
The first major paraxylene product was on stage at Expo Milano in 2015, when Virent investor Coca-Cola displayed 100% bio-based content Plant Bottles produced using paraxylene produced at Virent’s Madison, Wisconsin demonstration plant — the first demonstration scale production of a PET plastic bottle made entirely from plant-based materials. Expo Milano 2015 was a global showcase for sustainable innovation. Far Eastern New Century worked with Virent and The Coca-Cola Company to convert the BioFormPX to bio-PET resin.
Virent and jet fuels
In January 2016, we reported that bio-jet emissions testing by Rolls-Royce and supported by the Federal Aviation Administration (FAA) under the Continuous Lower Energy, Emissions, and Noise program, confirmed that jet fuels containing Virent’s BioForm Synthesized Aromatic Kerosene fuel blend produced a greater than 50% reduction in particulate matter emissions compared to conventional jet fuel. The emissions data and other successfully completed test results have been summarized in a report released by Rolls-Royce, British Airways, and the FAA.
Reaction from Planet Tesoro and its mighty moon Virent
“I am excited to be joining Virent at such a pivotal time for the company’s scale‐up plans and to be leading a team of passionate, highly capable and motivated individuals,” said Stacey Orlandi. “The strategic relationships with Tesoro and the Consortium partners Johnson Matthey, Toray and Coca‐Cola add significant capability and momentum to our commercialization efforts.”
“Tesoro is very pleased to have Stacey on board to lead the Virent team and support our commitment to renewables,” said CJ Warner, Tesoro’s Executive Vice President of Operations. “She brings a unique combination of success in technology, manufacturing and supply which are all high priorities as Virent progresses plans for commercialization. I would also like to thank Lee Edwards for his 8 years of dedication and success at Virent,” Warner continued. “Lee has been a great champion for the renewables industry and an exceptional leader for Virent as the company advanced the BioForming technology to the point where they can focus on scale-up and commercialization with Consortium partners.”
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