Cosan and Shell hook up

From the department of long overdue business news... Cosan and Shell have decided to merge their fuel retail businesses in Brazil in a deal worth $12 billion, and the market liked it:

Shares of Cosan jumped more than 6 percent in Sao Paulo, while Shell rose nearly 1 percent in London.

Cosan, a leading Brazilian sugar conglomerate, also bought Exxon's fuel retail business in Brazil a few years back, surprising industry watchers who expected an oil and gas player to come out atop the bidding. Brazil's energy story is more nuanced than the simple triumph of biofuels, but nevertheless the ascent of a sugar company to prominent status in the country's fuel retail industry is striking and has no analogy worldwide, as far as I know.

Exxon lends credibility to algae

I was under the impression that most of the big boys had looked at algal biofuels and passed, and that the space was dominated by start-ups like Sapphire, but now the biggest skeptic of them all, Exxon, has announced a substantial partnership and investment:

ExxonMobil Research and Engineering Company has entered into a research and development alliance with SGI, a privately held company focused on developing genomic-driven solutions and founded by genome pioneer, Dr. J. Craig Venter, to develop advanced biofuels from photosynthetic algae that are compatible with today’s gasoline and diesel fuels.

Under the program, if research and development milestones are successfully met [my emphasis added later], ExxonMobil expects to spend more than $600 million, which includes $300 million in internal costs and potentially more than $300 million to SGI.

Maybe things have just been quietly chugging along - both Chevron and Shell announced similar partnerships about 18 months ago, and I have not heard anything about them since. My own limited understanding is that algae is technically attractive because of its super-high photosynthetic rate, but that unless you can figure out how to grow it in the ocean it runs into the same space/scaling issues as other biofuel feedstocks.

Update: Looks like this play still has a long time horizon:

Exxon’s Mr. Jacobs said it would be “five to ten years” before small-scale plants are up and running. And neither company wanted to put a pricetag on the fuel produced from algae, which with today’s technology is still vastly more expensive than gasoline.

Update 2: Earth2Tech has a nice cheat sheet of major investments in algal biofuels. At $650m, Exxon's is the second-largest behind Algenol Biofuels' $850m plant in Mexico, and the two are the only ones above $100m.