Chevron, Weyerhauser team up for biofuels

One of the oldest timber companies and one of the oldest oil companies say they want to make biofuels.

There's nothing like 200-plus-year-old companies teaming up for the 22nd Century.

Oil giant Chevron and Weyerhauser, which has been in the lumber business since 1900, have formed a 50-50 joint venture called Catchlight Energy that will focus on developing fuels from cellulose-based biomass, like wood chips. Both companies have been working with various universities, such as Georgia Tech, on biofuel research, and this gives them a way to share information.

Chevron's Michael Burnside has been appointed CEO of the venture.

Some will no doubt boo and hiss this deal. Here we have two of the oldest companies focused on natural resources in the U.S. getting into the green technology business. Some may even claim that this is so-called greenwashing.

In all probability, Catchlight represents an early type of a deal that will become more common. The energy business differs substantially from the IT business. For one thing, the energy business takes scale. The world consumes more than 80 million barrels of oil a day. Thus, to get an alternative fuel to even make a dent in oil consumption you need pipelines and massive refineries. Second, to build to a meaningful scale takes a lot of time and money. Don Paul, Chevron's CTO, said last year that it probably takes close to $3 billion and 15 years to take a new fuel concept from the lab to industrial production.

Thus, it is not likely that a start-up can emerge and turn the industry upside down overnight. A Google of ethanol isn't likely.

Chevron, like other oil companies, also has acknowledged that it has to move beyond petroleum.

The deal is probably good for start-ups. Although it will work on its own technologies, Catchlight could serve as a magnet for many cellulosic companies that have been formed in recent years, and buy promising companies on behalf of its parents. Historically, that's what these joint ventures do.

 

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