Beyond Borders: Global biotechnology report 2010

of the manufacturing process. And that’s what we do: take 85% of
the greenhouse gases out by making these fuels from renewable
resources that don’t compete with food.
And, you know, in our case, sugar cane works beautifully as a
feedstock just as it does for ethanol. Ultimately, this technology
will be able to be run on the cellulosic sugars that are created when
you can break biomass down and get the sugars out. There are
many companies working on that. Once those sugars are available
at cost-effective volume, we can use products other than cane juice
and sweet sorghum. Our technology is feedstock-agnostic and any
source of sugar works.
Roe: There are really several critical components that eventually
become different verticals within this industry. I think the obvious
one is the feedstock materials that would be converted into fuels.
There would also be the actual conversion technologies now
emerging that would facilitate the conversion. You then have the
owner/operator group, which may be separate and distinct from
the other two. Finally, there will be the end-fuel marketers who are
actually putting this fuel into the marketplace.
Since this is still an early venture at this particular point in time,
the evolution of these will occur somewhat piecemeal, but there
would be certain advantages, obviously, in some sort of integration
of these aspects. We believe there will be a shift in the overall value
chain over time, along with who can extract the most value at
different points in time.
So ultimately, I think in a more mature market, most of the value,
not surprisingly, should accrue to those who control the feedstock.
That’s the way most of these types of commodity materials will
work. But in the interim and in the early going, it will be possible to
have value acquisition and value capture in separate parts of these
verticals before it becomes entirely a feedstock game.
Forer: We observe increased corporate activity in the market,
and not only from the oil and gas companies. From what you
have seen, what has worked in terms of partnerships? Are there
any lessons learned?
Mace: Everything we do in BP biofuels, we do in partnership. And
certainly what we are looking for in terms of partnerships is a
response to the fact that nobody knows everything about this new
industry. The biofuels industry is effectively the merging of two very
old and very well-established value chains. One is the agricultural
value chain and the other is the energy value chain. Therefore, I
don’t believe there is any operator today who can claim to have all
the capabilities and all the skills and know-how to make biofuels
happen on a very large scale.
So partnerships are effectively a case of merging the capabilities
and finding people with complementary skills who have the same
vision, the same strategic objectives as you have.
Roe: I would agree with what Ollie just said. And I would add that
I think as we look over our shoulders and look at what might
have worked in the current manifestation of biofuels, and as we
look forward to what’s likely going to be involved here, it seems
as though there are really sort of four fundamental areas that
have to converge and to which different players and partners can
bring different strengths. It’s really the convergence of people and
partners who can bring together feedstock, a conversion process or
technology, a distribution model into the marketplace and, fourth,
and perhaps most critical at the moment, the financing that allows
these other pieces to come together. In each case, in each project,
in each production facility, those are the critical four pieces.
So the most effective partnerships are going to be those in which
the players know their respective parts and can bring one or more
of those factors together.
Bandak: There is absolute strategic rationale and logic to pursuing
partnerships for the reasons just mentioned, especially financing.
A partnership helps validate the technology in question. It can
also help an early-stage company roll out its plans throughout the
country, which is critically important.
However, both parties need to know what they’re bringing to
the table. And there need to be complementary strengths and
weaknesses. And if you also think of a JV as a marriage, is there
going to be an exit? If so, how? Who is the ultimate buyer? How do
“If it takes us 20 to 30 years to get there,
we have to start now and we have to have
structures in place, including innovative
financing structures, that will allow this to
happen.”
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