Being leaders in the development of more sustainable, second-generation biofuels is part of our strategy and reflects our determination to build a material commercial business in at least one alternative energy technology.
Not all biofuels are created equal
Today’s first-generation biofuels are made from crops: ethanol from sugar cane, corn or wheat, and diesel from oily plants like rapeseed, palm and soya. Their CO2 benefits vary widely, depending on which crop is used and how they are produced. Producing large amounts of them could lead to competition for agricultural land and water. In some cases, their production is already contributing to the destruction of rainforests. Concerns also exist over workers’ rights and conditions at sugar and palm oil plantations.
Second-generation biofuels are made from non-food organic material, such as straw, wood residue and algae, and use different conversion technologies. They look promising. For example, at two second-generation demonstration plants where we are partners, CO2 emissions are around 90% less on a life-cycle basis than for conventional diesel or petrol. These fuels do not compete with food production for agricultural land. But another five to ten years of research and demonstration work is needed before they will be commercially available in significant amounts.
In the meantime, governments in a number of countries are already encouraging the production of biofuels with mandates and incentives. Second-generation biofuels will not be available in time to meet these requirements. So, although we do not currently make first-generation biofuels, in fulfilling our obligations we have become the world’s largest distributor of them.
More sustainable sourcing
As a major biofuel buyer, we are working to improve the sustainability of current first-generation production. We are collaborating with producers, governments and non-governmental organisations like the Round Table for Sustainable Palm Oil, to raise awareness and develop industry-wide sustainability standards for biofuel production. For the fuels we buy, we are including clauses in our supplier contracts requiring that their production not be linked to human rights abuses or recent clearing of important natural habitats. If producers cannot meet our requirements immediately, we expect them to work with us to develop a more sustainable supply chain. If they fail to improve, we will terminate the contract. To manage these efforts and check that suppliers comply, we have appointed a dedicated biofuel sustainability officer and team.
BIOFUEL RESEARCH AT SHELL’S
AMSTERDAM LABORATORY
Building a better biofuel
We see leadership in second-generation biofuels as strategically important. We are quadrupling our rate of investment in this area. We have specialists in India, the Netherlands, the UK and the USA working on research. Shell is a partner with a Canadian company, Iogen, using enzymes to make ethanol from straw. Iogen and its partners have operated a demonstration plant since 2004 and are now assessing the design and feasibility of a full-scale commercial plant. We are also partners with German firm Choren to produce fuel from wood residue. The world’s first commercial demonstration plant for this technology is due to open in 2008. In 2007, we teamed up with US company Codexis to develop new “super enzymes” that can convert non-food biomass into biofuels more efficiently. We also announced the construction of a pilot plant in Hawaii, in a joint venture called Cellana with HRBiopetroleum, to turn marine algae into biomass that can be used as a feedstock for biofuel. Marine algae, which is rich in vegetable oil, can be cultivated in ponds of seawater, minimising the use of fertile land and fresh water. And in March 2008 we began working with US company Virent to develop technology to turn the sugars from plants directly into gasoline instead of having to produce ethanol first. This could potentially eliminate the need for specialised equipment to transport and blend the biofuel and new engine designs to use it.
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