With a Push from Calysta, Biofuels Economy Tilts Toward Natural Gas

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network of distributed manufacturing sites close to small or mid-sized gas fields, Shaw says.

When Shaw was at Codexis, he oversaw a partnership with Shell for the development of enzymes to break down plant cellulose, a possible step in the conversion of biomass sources such as sugar cane stalks into fuels and chemicals.

But Shaw now sees the sugar-based biofuels industry as beset with problems, even though companies have successfully re-engineered microbes that feed on corn or sugar cane to produce ethanol, a renewable fuel component, and industrial chemicals. The main problem is that the feedstock, sugar, is too expensive to allow biofuels to compete with petroleum-based fuels, Shaw says.

By comparison, natural gas is cheap. In the wake of the US boom in shale gas production, the Nymex price dropped from almost $14 per million British thermal units (MMBtu) four years ago to less than $3 per million units, Pike Research analyst Mackinnon Lawrence said in a May report. The oil-gas price ratio, formerly stable at about 8 or 10 to one, reached a peak of 52 to one in April, Lawrence reported in June.

“The question is whether that’s going to hold,’’ Lawrence said in an interview with Xconomy. If it does, it could create significant opportunities for companies that are already incorporating natural gas into their processes, he says.

“You’re kind of seeing a pathway being beaten to natural gas,’’ Lawrence says. In addition to searching for new revenue sources, oil and gas companies may be motivated to find fresh uses for natural gas, because its release into the air could bring increasing liability, Lawrence says. New technologies can trace natural gas plumes back to their source.

A renewable fuel company, Primus Green Energy of Hillsborough, NJ, is tapping into the cheap natural gas supply as an additional feedstock for its thermo-chemical gasoline manufacturing process, which was originally developed to use wood chips.

Companies that use natural gas as an alternative feedstock for fuel production could be in line for government subsidies, depending on the result of an ongoing debate over the fate of the nation’s Renewable Fuel Standard.

Companies that process biomass now benefit from these government credits, Lawrence says. The federal incentives support a goal of adding 36 billion gallons of renewable fuel to the transportation fuel supply by 2022. But fuel production from biomass has not materialized to the extent that was expected. Some argue that the Renewable Fuel Standard should be scrapped, and others advocate extending the subsidies to natural gas-to-liquid producers.

Calysta’s natural gas fermentation method is now being tested at the lab bench scale of about one to five liters, Silverman says. Company researchers are still refining genetic modifications to the microbes that live off methane.

Shaw says he’s raising funds and looking for partners so Calysta can scale up as soon as possible. The company has funding through 2013 from DNA 2.0, which is Calysta’s largest shareholder at this point. But the parent company is happy to let others buy equity stakes to finance the growth of its spinoff, Shaw says.

The ideal partner would be a small or mid-sized gas field where Calysta could tap into the natural gas supply and demonstrate the value of its technology, Shaw says.

The new CEO says Calysta has to press its advantage as a first mover.

“We’re not going to be the only one in the sector,” Shaw says. “We’ve got to keep ahead of the game.”

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