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One Step Closer to Renewable Petroleum

LS9, with a fresh $30 million in hand is planning to ready LS9?s lead products for commercial production and support additional development and growth programs.

Raising money in 2010 was tough, but all of LS9’s big investors returned for a fourth financing round plus the huge BlackRock in New York joined in.  A year ago September LS9 raised $25 million in a third round of funding from oil giant Chevron’s venture capital arm and others, though the round was less than the $75 million-$100 million the company was asking for earlier in 2009.  But 25 plus 30 gets to $55 million – a big chunk of the plans can now proceed.

LS9 is working from a genetically modified version of e.coli bacteria to make diesel in the production of biofuels and chemicals from sugar and cellulosic biomass. The company, working with researchers from the University of California at Berkeley and the Department of Energy’s Joint BioEnergy Institute, said 11 months ago it has developed a microbe that can produce advanced biofuels directly from cellulosic biomass, such as woodchips, in a “one-step” fermentation process that eliminates the need for additional chemicals and industrial processes.

LS9 is more forthcoming than say Joule, who has a similar business model.  LS9 has published its paper in Nature demonstrating the engineering of e.coli to produce structurally tailored fatty esters (biodiesel), fatty alcohols, and waxes directly from simple sugars. Moreover, the paper shows engineering of the biodiesel-producing cells to express hemicellulases, a step towards producing these compounds directly from hemicellulose, a major component of plant-derived biomass.

All this puts LS9 directly into the biodiesel business and the refined chemicals market.

But $30 million keeps the goals up close in the more proven sugar feedstock arena.  The Florida plant, a small commercial type of facility, will continue development. The pilot plant in San Francisco and the Florida plant are both geared to using sugarcane sugar.  No cellulose feedstocks involved so far.  But as regular readers have seen, beyond using sugarcane, sugar beets and perhaps sweet sorghum could all be feedstock plants very quickly.  Right now though, dried crystal sugar in the world market is quite expensive for fuel production.  It’s not clear, but unlikely that LS9 will need dried sugar crystals and can work from an earlier production step.

The new investment round also has earmark suggestions that a large activity increase in Brazil will take place. Company comments hint that Brazilian development will not be just for sugar supplies but for marketing fuels and chemicals.

LS9, like other firms, swaps in and out a few enzymes inside the bacteria so instead of converting sugars into fatty acids, they become super-efficient factories for converting sugars into fuels like diesel. Change out other enzymes, and LS9 can also make higher-priced industrial chemicals like the ones that go into soap or toothpaste.

All the other various firm’s work is nothing like the size and scale of today’s fossil fuel production.  LS9’s small pilot plant in South San Francisco has been operating for two years, and the new funding should make its next big step up at the industrial facility in Florida for an annual capacity of 2.5 million gallons. The company’s task will be to show investors that this process can truly make the leap from tiny lab batches of fuel, to the real thing in industrial settings.

Who’s in front of the firms racing along the edge of biofuels?  That’s hard to say, LS9 has a production price target of $50 per barrel.  Where Joule, Amyris, Solazyme and the others are isn’t as clear.  But $50 per barrel diesel in an $88 crude world looks really good.  That investment amortization would close up really fast.

The other notable point is a careful look at many the web pages suggests that production plants might not be so complex as even say an ethanol facility.  Say the process is profitable at $50 a barrel, that makes proving up the cellulose bugs a very attractive development option.  Then LS9 could become a major petroleum competitor.

One wonders, do or can a modification of the LS9 bugs handle the sugar galactose and the other plant components from seaweed or macro algae?

The coming years are going to be very interesting.

By. Brian Westenhaus

Source: Renewable Petroleum is Getting to Scale




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