San Diego’s Sapphire Energy Names New CEO Amid Signs of Change

It’s been clear for awhile that changes were underway at San Diego-based Sapphire Energy, an industrial biotech founded in 2007 to develop a revolutionary process for turning algae into gasoline and other fuels.

Today the San Diego startup says former Verenium CEO James Levine has taken over as Sapphire’s CEO from Cynthia “C.J.” Warner, an oil industry veteran and expert in refining, transportation, and operations who joined Sapphire in early 2009. She was previously a Group Vice President for Global Refining at BP, and is said to be returning to the oil and gas industry.

Warner joined Sapphire as president and chief operating officer, working initially with founding CEO Jason Pyle. But her expertise in refining operations made her career path manifest as Sapphire moved to demonstrate the company’s technology at an industrial scale. She was named board chairwoman in 2010 and became CEO in 2012, when Pyle left the company. In its statement today, Sapphire says Warner will continue to serve as chairwoman. Still, her departure signals an end to the company’s initial strategy, which was narrowly focused on producing algae-based biofuels.

I had surmised that the oil and gas industry’s expanding use of fracking technology to amplify conventional oil and gas production had undermined the economics that made algae-based crude oil production so attractive. Whether fracking has actually changed the economics, or merely injected enough uncertainty to make investors leery has become a matter of continuing debate. In any event, as a startup developing a sustainable energy alternative to traditional fossil-based fuels, Sapphire also encountered intense resistance in Congress to policy changes that could have helped algae-based biofuels gain a foothold in U.S. markets.

So while the company will continue to advance its work on algae-based biofuels, Sapphire also has been reorganizing and considering its strategic options. I recently reported that Sapphire reduced the size of its workforce earlier this year, trimming about 50 employees, mostly from development programs that had matured, rather than ongoing operations, according to spokesman Tim Zenk. The company now has a little over 100 employees, and the goal was to reduce the burn rate to make the best use of existing capital, he says.

James Levine

James Levine

In a phone interview this morning, Levine says fracking “has almost been a sideshow” to Sapphire’s core expertise. “I don’t see fracking as the death knell of the strategy,” he said. “It’s just a part of the oil industry that we have to deal with.”

In his first day on the job, Levine says Sapphire is not announcing any substantive changes in the company’s mission or technologies. But he will be looking for ways to broaden and diversify Sapphire’s core expertise by developing new businesses in attractive areas—“something I would measure in months, not weeks.”

At Verenium, where Levine spent four years as a board member and two years as CEO, he led the company’s key strategic partnerships with BP, which acquired the company’s cellulosic ethanol unit in 2010, as well as DuPont, Royal DSM, Bunge North America, Cargill, Novus International Inc., Colgate-Palmolive Co. and Tate & Lyle PLC, among others. Verenium had amassed a large catalog of enzymes that could be used as catalysts to accelerate a host of biochemical reactions, and Levine sought to work with industrial partners that could make use of several commercial business programs Verenium had pioneered. He says he developed excellent relationships with big companies that are major players “to bring in the skill sets that we as a small company could not create.”

While Levine also oversaw the sale of Verenium to BASF last year, he says it would be a mistake to think that he was hired at Sapphire to oversee a similar outcome. A more important example, Levine says, is Sapphire’s recent deal with Sinopec, China’s state-owned oil and gas conglomerate.

Continuing to explore opportunities in China makes sense, Levine says, not because operating costs would be significantly lower than the United States, but because China has made finding a solution to both their energy needs and air quality problems a national priority.

There was no immediate word about Warner’s next job.

In the statement issued today by Sapphire, board member Robert Shapiro says, “The impact of CJ’s leadership on Sapphire Energy’s mission to deliver commercial scale algae-based fuels has been tremendous, from overseeing the build out and commencement of operations at the world’s first algae-to-energy facility in New Mexico to securing key partnerships with some of the world’s top oil and gas refiners.”

Bruce V. Bigelow was the editor of Xconomy San Diego from 2008 to 2018. Read more about his life and work here. Follow @bvbigelow

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