Two major partnerships have taken shape recently between global oil conglomerates and smaller cellulosic biofuel companies, including a $12 billion joint venture between Shell and Brazilian ethanol producer Cosan, and an $11 million deal between Petrobas and KL Energy Corporation to expand Brazilian operations.
Corn-based ethanol has been criticized as an energy-intensive fuel source with a very large carbon footprint. Competition between corn crops grown for food and crops grown for fuel production has been a major concern.
Cellulosic ethanol, on the other hand, can be made from just about any crop or plant matter that has a high concentration of cellulose, which means that waste crops, stalks, leaves and husks can be turned into fuel. Technology developments and a drop in the price of necessary enzymes for the fuel conversion process has helped cellulosic ethanol production more economical, and therefore more practical as a major-scale substitution for gasoline-based liquid fuels.
Besides providing a major boost to the Brazilian cellulosic ethanol industry, these deals will allow the smaller companies to access broader markets and sources of capital. The partnerships also demonstrate continued interest of Big Oil in “next-generation” biofuels as the wave of the future.