An increasing number of people around the world are seeing their quality of life improve, which means worldwide demand for meat, finished goods, and fuels will continue to see steady growth. That's great news for integrated oil and gas giant Total (TOT +0.00%). However, there is an increased pressure to meet the world's growing demand for resources with sustainable products and supply. Rather than view this shift in thinking as a problem, the energy giant is investing heavily in renewable-energy projects for the future of fuel. If successful, the projects could represent amazing growth opportunities. Let's follow the money and take a deeper look at three unique investments driving Total's vision of the future.
Fuels from biotechnology
Amyris owns operates this industrial scale facility in Brotas, Brazil. Source: Amyris.
Whereas BP (BP 4.02%) and Royal Dutch Shell (NYSE: RDS-A) pulled the plug on their direct investments in biobased fuels and chemicals produced from biotechnology, Total has stayed the course with its strategic investment in Amyris (AMRS +0.00%). In fact, Total opted to increase its investment in the last year as Amyris faced developmental delays and operational inefficiencies. It's exactly what us Fools try to emulate when taking a long-term approach with the companies we own. Things should begin to get better soon, as Amyris has made progress in production in the past few months and cut operational expenses to record lows.
Amyris utilizes the power of synthetic biology to optimize yeast strains to produce a renewable hydrocarbon called farnesene. The building block molecule can then be processed into everything from lubricants, flavors and fragrance oils, polymers, surfactants, and, of course, fuels. Total is interested in the full capabilities of Amyris' platform, but the early focus is on renewable diesel and jet fuel, which is already be utilized in Brazil's economy.
The chemical properties of farnesene-based fuels allow them to be blended at much higher rates than currently allowed by biodiesel (about 7%) and biojet fuels. Additionally, they are much more compatible with existing infrastructure and engines. If Amyris continues to meet production milestones at Brotas, the pair will create a 50/50 joint venture to market and distribute fuels worldwide. I wouldn't be surprised if Total decides to build a dedicated facility for the JV once production characteristics improve, which would free up capacity at Brotas -- expected to reach 40 million liters of farnesene per year -- for higher margin products.
Fuels from thermochemical processes
A "simple" diagram illustrating how second generation fuels will be made by Total and its partners. Source: IFP Energies nouvelles.
BP and Shell ditched smaller biotechnology companies utilizing biochemical pathways in living organisms to invest in thermochemical platforms (for the most part), which utilize high heat and pressure to drive chemical reactions. BP is the largest energy company backing Cool Planet Energy Systems, while Shell is now focusing on developing technology created by Virent. Total doesn't see it as a "one or the other" dilemma, although the company has invested heavily in thermochemical processes as well.
One such investment is BioTfueL. The project was launched in 2010 by six companies with the goal of producing 200,000 metric tons, or MT, of biodiesel and biojet fuel per year from just 1 million MT of biomass by 2020. That's a pretty ambitious goal and one that would yield nearly 400% more fuel per unit of biomass than the current best biotechnology platform. However, the project will also incorporate refining residues and coal as feedstocks, which means the final products will be a mixture of biofuel and fossil fuel. At the end of the day, it's a novel process that would greatly reduce greenhouse gas emissions and monetize various low-cost waste streams.
Next-generation ethanol from biotechnology
The plan for scale-up at Futurol: realistic or not? Source: Futurol.
Why stop at one crazy-ambitious thermochemical or biotechnology platform? Total and 10 other partners have been working on the Futurol project since 2008. The company created for Futurol, called Procethol 2G, has an ambitious plan to develop a process that could incorporate any type of biomass to produce second generation ethanol. So far so good. A pilot facility with an annual capacity of 180,000 liters began operations in late 2011, although a decision on whether to move to a 3.5 million liter-per-year demonstration facility isn't expected until later this year.
Biomass is chemically pretreated to extract sugars, which are then fed to robust yeast strains that produce ethanol during fermentation. It's similar to current ethanol production, except for the flexibility of the initial feedstock, the enzymes involved in breaking down the biomass, and the flexibility of the yeast. The opportunity could be massive. First-generation ethanol producers could retrofit their existing facilities with the new technology to take advantage of multiple feedstocks and hedge against seasonal volatility. That represents about 15 billion gallons of annual capacity in America alone. If successful, the partners hope the technology will be ready to license worldwide by 2016 to 2020.
Foolish bottom line
What does the future of fuel look like? In reality, large amounts of fuels will likely be produced from a combination of thermochemical and biochemical platforms in the coming years and decades. Perhaps one day Total will have to make a decision between one technology or the other, but for now it is hedging its bet by evaluating both simultaneously. Either way, investors have to take pride in owning such a forward-thinking company with a long term focus. That's pretty Foolish (with a capital "f").
