Investing Caffeine

From Pond Scum to the Pump

September 9, 2009 at 4:00 am Leave a comment

The “Green” movement got a shot in the arm recently when a $600 million joint venture between Craig Venter, the critical man behind mapping the human genome, and ExxonMobil the oil company (XOM) was formed to engineer oil from green algae. More than half of the money will be directed to Dr. Venter’s La Jolla, California-based biotech firm Synthetic Genomics.

On the surface the announcement is very appealing because it marries the biggest brains in genetic engineering (Venter) with the biggest brains in energy/oil (ExxonMobil). Add hundreds of millions of dollars to this powerhouse dream team and perhaps something miraculous can be commercialized in the next 5 – 10 years. Environmentalists appear to be on board too, if the hype turns to reality, because not only will cleaner fuels be created but the algae production will reduce harmful CO2 (carbon dioxide) emissions from the air. ExxonMobil’s grand scheme is to build algae farms near power plants and other major CO2 emitters –the farms will feed the algae and by doing so will help curb long-term fuel costs for the businesses.

ExxonMobil and Craig Venter are not the only game in town. A scientific article written by Molika Ashford claims there are more than 50 companies trying to affordably squeeze oil  from slime, including a creative way of squeezing oil from algae-eating fish.  

Although the “Greenies” seem to buy into the algae-oil process, the environmentalists are not the only constituency the genetic engineers must appease. The ethical debate over manipulating life forms is already percolating – just think, Frankenstein meets algae. In a newer Bloomberg article, Alison Smith, a professor of plant sciences at the University of Cambridge in England commented on the state-of-the-art research: “It is an untested technology, and there needs to be extensive debate about the ethics and environmental consequences of generating these new organisms.” 

More recently, Dr. Venter performed a  pioneering ‘gene swap’ on a simple species of bacteria called Mycoplasma mycoides, which raised optimism levels even higher that a green, bio-engineered fuel solution is indeed possible. Dr. Venter effectively created a new form of bacteria by swapping DNA from one form of bacteria into another.  Researchers and scientists around the globe are searching for solutions to our worsening global energy problems, however time is required. I will anxiously watch from the sidelines to see if big brains and big oil can come together to make “green gold.”

Wade W. Slome, CFA, CFP®

Plan. Invest. Prosper.

Sidoxia Capital Management and its clients did not have any direct position in XOM at the time the article was published. No information accessed through the Investing Caffeine (IC) website constitutes investment, financial, legal, tax or other advice nor is to be relied on in making an investment or other decision. Please read disclosure language on IC “Contact” page.

Entry filed under: Stocks, Themes - Trends. Tags: algae, Craig Venter, engineering, Exxon Mobil, ExxonMobil, genes, genetics, oil, Synthetic Genomics.