Versalis invests $20M in Genomatica, launches JV for Bio-based Butadiene

Renewable chemicals’ #1 hottie lands a signature JV, and a tidy investment from the Italian chemical giant.

In Italy, Versalis and Genomatica announced the establishment of a technology joint venture for bio-based butadiene from non-food biomass. The resulting process will be licensed across Europe, Asia and Africa by the newly-created joint venture.

Versalis — the chemical subsidiary of Eni — aims at being the first to license the process and build commercial plants. It will also provide over $20 million in funding to Genomatica to support development of the integrated end-to-end process.

Future licensees of the process, including Versalis, will provide the capital required for the construction and operation of their own plants, and be responsible for use and sale of the resulting butadiene. Genomatica brings its expertise in biotechnology, particularly in engineering organisms and fermentation. Versalis brings its long-standing expertise in catalysis and process engineering.

Versalis and green chemistry

Genomatica and Versalis deepen their strategic partnership by creating a joint venture for bio-based butadiene. Genomatica CEO Christophe Schilling is pictured in top row, third from the right. Versalis CEO Daniele Ferrari is pictured in top row, third from the left. Genomatica executive chairman Bill Baum is in the top row at right.

Versalis, rebranded from the former Polimeri Europa, is the largest Italian chemical company and a subsidiary of Eni – and is the second largest producer of elastomers in Europe. With a 2012 production of 6.2 million tons, Versalis is also a leading producer of intermediates, polyethylene, and styrenics.

The company has developed Matrìca (a 50:50 joint venture with Novamont) which is building a bio-chemical complex at Porto Torres, Sardinia, Italy. Versalis has also partnered with Yulex for guayule-based natural rubber and with Pirelli for a joint research project aimed at the use of guayule-based natural rubber in tire production.

The Versalis-Yulex partnership will cover the entire manufacturing chain from crop science to biorubber extraction to the construction of a biomass power station. The Yulex partnership will leverage Yulex’s core competencies including crop science and biorubber extraction technologies, to boost Versalis’ bio-based portfolio. The investment will include an ambitious research project to develop technologies targeting the tire industry.

Versalis and butadiene

Butadiene is a raw material used in the production of rubber for tires, electrical appliances, footwear, plastics, asphalt modifiers, additives for lubricating oil, pipes, building components, and latex.

Butadiene is a key intermediate for Versalis elastomers business. The raw material required to produce it, extracted from ‘C4’s (a mixture of molecules containing four carbon atoms) and produced by cracking plants, is increasingly subject to availability problems.

Decreasing supplies and a lack of dedicated butadiene production facilities have resulted in significant long-term pressure on the price and volatility of the chemical, which in turn increases the price of butadiene-based products, including tires.

Concerns of scarcity in the butadiene market are compounded by growth forecasts within the BRIC countries where demand for automotive products made from butadiene, such as tires, is expected to increase.

In this context, butadiene supplies from biomass become strategic to Versalis, because in times of C4 stream scarcity it can be freed from naphtha cracking processes.

Eni and biofuels

In September 2012, Eni announced a $125 million project to convert its Venice Refinery into a “bio-refinery”, producing renewable diesel using the Ecofining technology developed and patented by Eni.

The Green Refinery process will start with an initial conversion of existing facilities which will be launched in the second quarter of 2013 and completed by the end of this year. Until the start of the changeover, the refinery will continue to produce using to traditional methods. Biofuel production will start from January 1 2014 and will grow progressively as the new facilities enter into operation. The new facilities to be built under the project will be completed in the first half of 2015.

Honeywell’s UOP and Eni SpA jointly developed the UOP/Eni Ecofining process, which uses hydroprocessing technology to convert non-edible natural oils and animal fats to Honeywell Green Diesel. The fuel offers improved performance over biodiesel and petroleum-based diesel, including a high cetane value of 80 compared with a cetane range of 40 to 60 found in diesel at the pump today. Cetane value is the measure of the combustion quality of diesel. Higher cetane values help diesel engines operate more effectively.

Reaction from Genomatica and Versalis

“Versalis’ experience in downstream applications, particularly in the Elastomers business, and its ability to deploy plants, make us a preferred partner for Genomatica. The signing of this joint venture will offer Versalis a better way to start on an innovative path between the traditional Butadiene production process, which positions the company as a leader in Europe, and any new opportunity for the application of biotechnologies within the chemical industry,” said Daniele Ferrari, CEO of Versalis. “We’ve seen lots of different technologies out there. Genomatica was the clear choice, and the best positioned to satisfy market needs.”

“The combination of Versalis and Genomatica brings the industry closer to a butadiene source that will be more sustainable and deliver more stable production costs,” said Christophe Schilling, CEO of Genomatica. “Having seen successful commercial scale production of BDO using our process, this partnership further validates the ability of our technology platform to bring additional chemicals to life.”

The bottom line

Eni continues with this deal to move strongly into the green sector — and in particular, is establishing a path for assuring and affordable and abundant supply of butadiene for its own processes — as well as other chemical companies concerned that the rise of natural gas will decrease the availability of C4 molecules from traditional oil refineries.

For Genomatica and the industry as a whole, the timing could not be better — the company continues to find capital outside of the IPO process that it ultimately abandoned — as well as de-risking its future project stream via a JV that will construct at least a first commercial plant for the butadiene technology.