BASIC Associates: Petrobras Cellulosic Ethanol Project

Tuesday, November 2, 2010

Petrobras Cellulosic Ethanol Project - Who's on First?

By Robin J. Johnson, Ph.D.

In the ongoing quest by Petrobras to enter the cellulosic ethanol field, at least two companies appear to be involved. Novozymes of Denmark and KL Energy of South Dakota have both signed agreements to develop cellulosic ethanol technology for sugarcane bagasse.

The relationship between the three companies isn't clear. Petrobras' ethanol production activities are handled through its subsidiary, Petrobras Biocombustivel, which plans to hold a 45.7% equity interest in Acucar Guarani, the fourth largest sugarcane processor in Brazil, and a 49% equity stake in Nova Fronteira Bioenergia S.A., a joint venture with Grupo Sao Martinho.

Novozymes is a major supplier of enzymes for (among other things) biofuel production. The company is a leader in cellulosic ethanol enzyme technology.

KL Energy claims to have a proprietary process for producing cellulosic ethanol. Their technology includes thermal and mechanical pretreatment and enzymatic hydrolysis of cellulosic materials and fermentation of both C5 and C6 sugars.

Is Novozymes supplying enzymes for KL Energy's process to be integrated in a Petrobras sugar mill? Here's what we know.

In August of 2010, Petrobras, and KL Energy Corporation signed a joint development agreement for technology to turn sugarcane bagasse into ethanol. The 18-month project includes an investment by Petrobras of $11 million to adapt KL Energy’s demonstration facility in Upton, Wyoming to use bagasse. The agreement provides Petrobras with the option to license KL Energy's technology for use within Petrobras Group assets. Integration of KL Energy technology into one of Petrobras’ Brazilian sugarcane mills is scheduled to go online sometime in 2013.

On October 15, 2010 Novozymes and Petrobras announced an agreement to develop a process to make ethanol from sugarcane bagasse.

On October 21, 2010, KL Energy announced it had re-acquired all third party technology licensing agreements in order to facilitate commercialization of its technology with its strategic partners. On September 1, 2010 KL Energy signed a Master Coillaboration Agreement with add blue Consultoria Ltda. of Brazil. The two companies plan to set up a new company to handle business in Brazil.

KL Energy lists Petrobras as one of its partners on its website, but websites aren't always kept current. The Novozymes press release doesn't mention any other partners, though any cellulosic ethanol plant would have to use some form of pretreatment and fermentation technology. It will be interesting to see how all these arrangements shake out and are revealed over time.

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About BASIC

Unlike other investor services, BASIC Associates focuses not on the financials, but on the science behind various R&D initiatives in bioproducts. Sound science, after all, is the ultimate driver of profitability in the industry. We believe that a superior understanding of the science behind the business model reduces uncertainty and risk and allows for better decision-making by investors and stakeholders.

The principals at BASIC Associates use their doctoral training, coupled with years of experience researching and writing about biofuels, biochemicals, and other bioproducts, to provide an accessible science-oriented analysis of companies and projects in this growing market.

Meet the Principals

Robin J. Johnson, Ph.D.

Dr. Johnson is a cofounder of BASIC Associates. She previously worked as a curator for Garbrook Knowledge Resources, which she joined in March of 2007. Prior to joining Garbrook, she was a Scientist at Genstruct, a systems biology company that creates computer models of biological pathways, and a curator/editor at Incyte and later Biobase, working on the Proteome BiKnowledge Library. (Proteome was a successful knowledge company that provided comprehensive annotation of the proteomes of a variety of organisms, including humans.) As an assistant Professor of Biochemistry at Boston University School of Medicine from 1985-2003, Dr. Johnson taught Medical School and did research in the field of cellular neurobiology. She has numerous publications to her credit. Dr. Johnson received her B.S. in Biology from the State University of New York at Stony Brook and her Ph.D. in Anatomy from Boston University. Her postdoctoral studies of viral infection in the nervous system were performed at Yale University School of Medicine Section of Cell Biology.

Daniela Sciaky, Ph.D.

Dr. Sciaky, a cofounder of BASIC Associates, is a scientific expert in plant biotechnology and biofuels and bioproduct processes. From 2006 to 2010, she was the senior content expert at Garbrook Knowledge Resources, where she contributed her expertise to the gathering and organization of biofuels and bioproduct information. From 1998 to 2006, she curated the scientific literature on a wide variety of topics, including plant and yeast molecular biology, helping to develop content for the Proteome databases. She has also held research positions with Children's Hospital of Cincinnati and Albany Medical College and faculty and research positions at the University of Cincinnati and Brookhaven National Laboratory. During the course of her career, Dr. Sciaky has served as a peer reviewer for the US Department of Agriculture, the National Science Foundation, and the US Department of Energy, in addition to reviewing papers for the The Plant Cell, Biochemistry, Planta, Nucleic Acids Research, Plasmid, Bio/Technology and BioScience journals.

Dr. Sciaky received her M.S. and Ph.D. in Genetics from Washington State University and her B.S. in Biology from the State University of New York at Stony Brook. She did post-doctoral research at the Cold Spring Harbor Laboratory, NY. She has presented at numerous scientific conferences and is well published in plant disease and natural systems as well as other fields.

Henrique Oliveira, MBA

Henrique, a cofounder of BASIC Associates, worked as a curator for Garbrook Knowledge Resources from 2008 to 2010. A citizen of both Brazil and the United States, he received his MBA in Finance in 2008 from the Stephen M. Ross School of Business at the University of Michigan in Ann Arbor, where he was awarded a fellowship by the University’s William Davidson Institute to conduct research on Brazil’s 35-year experience with biofuels. As a Fellow of the Institute, Henrique spent several months in 2007 touring biofuel facilities in Brazil with Tom MacDonald, a senior researcher with the California Energy Commission and the head of MacDonald Associates, a boutique consulting firm specializing in alcohol transportation fuel.

Prior to joining Garbrook, Henrique worked as a consultant for Hart Energy’s Global Biofuels Center. He has extensive business experience in Brazil and has authored a number of reports on the country's biofuels industry, which, because of its size and depth, impacts alternative energy initiatives worldwide. Henrique has also written editorials on the Brazilian ethanol and sugar industry for various publications.