Here in Cambridge it\u2019s humid and the spritely Liz Warren will soon be seen power walking in a straw hat through my neighborhood again.\u00a0Amidst the brimstone of the ongoing blue\/red culture war, it is useful to consider that even the less than conscientious former EPA chief Scott Pruitt can do some good, with implications that could reach many billions of dollars and portend big changes in agriculture, alcohol fermentation, and fuel and chemical production as we know it.<\/p>\n
Last month, when EPA announced it had approved higher iso-butanol content in gasoline blends, you\u2019d be forgiven for not paying much attention.\u00a0But then GEVO\u2019s stock popped 700% over a few spicy days.\u00a0 That got traders and all those numbers guys chattering as if GEVO was the latest crypto-chit.\u00a0 In the weeks leading up to this, GEVO had completed another reverse stock split in order to keep itself above NASDAQ minimums.\u00a0 And although I am not suggesting any prior market knowledge of the EPA announcement, we may now guess what Scott Pruitt was doing in his $43,000 soundproof phone booth\u2026 He was making plans to approve a higher blend rate for a better biofuel.
\nDespite the explosive inflation and deflation of GEVO\u2019s stock, the successful announcement was largely the work of Butamax not GEVO, and you could have looked for a bump in the stock of its\u2019 parent companies, but given you can\u2019t buy Butamax bio-butanol blended gasoline (there is a small amount of GEVO \u201cethanol free\u201d blended gasoline sold at marinas and some truck stops) there was no such reaction.\u00a0 Both Butamax and GEVO have suffered mightily over the last few years, but the people, who have hung in there and put their careers on the line to make it happen may indeed have finally turned a corner.<\/p>\n
This is why I care
\nTo say biofuels are not sexy these days is to engage in vast understatement.\u00a0 Moving from extractive to renewable fuels and chemicals production has not been easy.\u00a0And there\u2019s no need to recap the failure of Industrial Biotechnology at large or the wholesale shift in focus from fuels > chemicals > specialty chemicals > food\/feed > nutraceuticals, F&F, etc.\u00a0 Each representing a step down in market size and a step up in value per measure.\u00a0 So, why bang your head on the wall of thermodynamics and try to force biological systems to do things they don\u2019t want to do (only to make pseudo-commodities)? Answer: Because nothing comes close to the market size and value of fuels and chemicals and if you\u2019re big, small markets don\u2019t move your revenue or net income numbers.<\/p>\n
Take a look at ExxonMobil\u2019s 10Q sometime.\u00a0 You will see what I call the 1040 rule in action.\u00a0That is chemicals make up only 10% of refining revenues, but 40% of profits. We need to think of a biorefinery in the same way and it\u2019s important to note, this works in reverse.\u00a0 Flavors and fragrances are great high value molecules, but they also represent very small markets. In terms of Industrial Biotechnology, that\u2019s a lot of metabolic engineering for not a lot of product.<\/p>\n
I\u2019m not going to recount all the physical and economic benefits butanol has over ethanol.\u00a0 That\u2019s a story too many times told elsewhere under brighter skies. But the truth is large scale production of butanol has the potential to disrupt many markets, some obvious others less so.\u00a0 If implemented it could drastically increase corn production and spur construction of new plants along with the retrofitting of existing ethanol plants.\u00a0 Refiners would be able to blend and retake margins (and RINs) long lost to fuel distributors\/retailers.\u00a0 In many parts of the country refiners could avoid expensive reformulated blendstock for oxygen blending and simultaneously utilize inexpensive heavier natural gas liquids from midstream suppliers. In the US, the largest blenders of butanol fuel oxygenate would likely include: Valero, ConocoPhillips, ExxonMobil, BP, Marathon Petroleum, Chevron and Sunoco.<\/p>\n
And that\u2019s just the beginning
\nIf we take it a step further and think about butanol priced at fuel value, we could see many other potential impacts.\u00a0 Particularly, the replacement and substitution of petroleum based iso-butanol and n-butanol in chemical derivatives.\u00a0 Granted, this could also require reformulation of n-buoh based products and issues like steric hindrance will not allow it for all applications.\u00a0However, if the price is right and the supply is sustainable\u2026 You will get companies buying fuel grade, and cleaning it up.\u00a0 Broadly, for all makers and users of:\u00a0 solvents, adhesives, plasticizers, amino resins, and butyl amines there will be strategic impact.\u00a0 And of course, readily available butanol biofuel would impact nobody more so than Dow, North America\u2019s largest captive producer of buoh and derivatives.\u00a0 In addition:<\/p>\n
For butyl acrylates we would see impacts in the businesses of:\u00a0Dow-Dupont and their progeny, BASF, American Acryl, Nippon Shokubai, and Arkema.\u00a0 For butyl methacrylate: Dow and Lucite.\u00a0 For makers of glycol ethers changes may be coming for: Dow, Eastman, and LyondellBasell.\u00a0 For butyl acetate: Dow, Eastman, and OXEA.<\/p>\n
Butanol solvent and derivatives are widely used in paints and coatings.\u00a0 Availability of inexpensive high purity butyl fuel will create opportunities for paint makers: Axalta, Akzo Nobel, PPG, Sherwin Williams, and Valspar.<\/p>\n
Other companies that could be impacted include: Ferro Corporation, Georgia Pacific Resins, US Amines, Taminco, Chevron Oronite, Rhodia, ICL Industrial Products, Lubrizol, Infineum, Afton and Elco.<\/p>\n
Across the pond in Western Europe this will affect merchant buyers like Shell, Celanese, ICI, PPG, Evonik, Plastificantes de Lutxana, Proviron, and Polynt.<\/p>\n
To be sure this is only a partial list and clearly, this is only going happen following the large scale conversion of ethanol plants and competitive pricing of iso-butanol.\u00a0 Still, what we are talking about could be very important going forward. The stakes are high and smart companies will have strategies ready before it starts to happen.\u00a0While it\u2019s easy to be cynical given the rocky performance of Industrial Biotechnology applications, it\u2019s wise to consider that not so long ago the vast majority of ethanol was produced from petroleum feedstock.\u00a0 Butanol could easily see similar displacement.\u00a0 Change lies in every direction.\u00a0 So, now I guess we\u2019ll just begin again.<\/p>\n
Nonsense, we will bury you
\nWhile the story of renewable butanol like other attempts to replace synthetic chemistry with synthetic biology is still being written, it is interesting to consider the perspective of entrenched market leaders, most with fully depreciated assets or like Saudi Butanol Company with brand new low cost manufacturing capacity.\u00a0 Traditionally, these companies respond to an upstart in draconian fashion. Dropping prices to cost and holding them their until the new entrant suffocates, puts its tail between its legs and shuts down. After which, the leader raises prices and gets on with it.\u00a0 But biofuels operate in regulated markets and available credits will indirectly lower resultant average cost as those credits get shared across the value chain.\u00a0 How exactly those would be divvied up is interesting to think about.\u00a0 In the end I am reminded of a conversation I had with executives at Dow, who said, \u201cSure, if you can make it cheaper than we can, we\u2019ll buy it from you.\u201d\u00a0 At the time I took it as a challenge as much as an offer.<\/p>\n
Some will spend another pointless year foaming at the mouth.\u00a0Do the economics work nationally or only in California and Canadian provinces with a Low Carbon Fuel Standard?\u00a0Will incentives be effectively distributed a cross the value chain or will they be captured for the benefit of a few?\u00a0We will see.\u00a0 Whatever the outcome there are a whole lot of companies out there that haven\u2019t given renewable butyl fuels and chemicals much thought.<\/p>\n
It is interesting to look in the rearview mirror at an EPA chief that was so toxic he was rejected by this president.\u00a0 From the beach we watch Andrew Wheeler step into the breach.\u00a0Will he be the coal roller my neighbor thinks he is or will there be another silver lining?\u00a0 There are those who own their minds and those who crawl.\u00a0Which is which and who is who?<\/p>\n
Sam Nejame is CEO of Promotum, a management consulting firm focused on business development and market analysis. His practice covers the fields of petroleum, bio-based fuels, chemicals and biologics. He can be reached at snejame@promotum.com.<\/p>\n","protected":false},"excerpt":{"rendered":"
Here in Cambridge it\u2019s humid and the spritely Liz Warren will soon be seen power walking in a straw hat through my neighborhood again.\u00a0Amidst the brimstone of the ongoing blue\/red culture war, it is useful to consider that even the less than conscientious former EPA chief Scott Pruitt can do some good, with implications that […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_seopress_robots_primary_cat":"","nova_meta_subtitle":"","footnotes":""},"categories":[5572],"tags":[5714,12366,10563],"supplier":[8390],"class_list":["post-55131","post","type-post","status-publish","format-standard","hentry","category-bio-based","tag-biofuels","tag-fuels","tag-renewable","supplier-biofuels-digest"],"_links":{"self":[{"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/posts\/55131","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/comments?post=55131"}],"version-history":[{"count":0,"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/posts\/55131\/revisions"}],"wp:attachment":[{"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/media?parent=55131"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/categories?post=55131"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/tags?post=55131"},{"taxonomy":"supplier","embeddable":true,"href":"https:\/\/renewable-carbon.eu\/news\/wp-json\/wp\/v2\/supplier?post=55131"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}