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How much should oil firms invest in alternative fuels?
San Francisco Chronicle


February 11, 2007
Sunday PM

To most people, a half-billion-dollar investment in biofuel research looks like serious money.

That's the amount oil giant BP said last week it will spend to create an alternative energy research center with University of California Berkeley, the University of Illinois and Lawrence Berkeley National Laboratory.

The research center represents the latest example of Big Oil pumping cash into the search for new sources of power. BP, in addition to the new Energy Biosciences Institute at Berkeley, plans to spend $8 billion over 10 years on its own alternative energy effort, which includes building solar cells and wind farms.




But, for BP and other oil companies reaping record profits, research on new energy sources is far from their biggest investment.

BP's earnings hit $22 billion in 2006. The company spent $15.5 billion during the year buying back its own stock, almost twice what it may spend on renewable power and alternative fuels in a decade.

Many renewable-energy advocates say that, for now, oil company commitment to alternative energy remains relatively small.

"While the rhetoric is promising, in the end, they're still oil and gas guys," said Tyson Slocum, director of the energy program at the Public Citizen watchdog group.

The companies counter that they don't want to dump money into technologies that may not pan out.

Donald Paul, who oversees alternative energy programs at Chevron Corp., said the infrastructure needed to mass produce and distribute any type of fuel takes years to develop, and millions, if not billions, of dollars to build.

Chevron has invested in hydrogen fueling stations and a biodiesel plant, among other things. It plans to spend about $2.5 billion on alternative energy in the next three years.

Large-scale investments should come only when each technology's costs, reliability and potential become clearer, said Paul, Chevron's chief technology officer.

"We have been viewed by some as conservative in our approach to this business," he said. "We've learned to take the time to get it right."

But some oil industry critics say the companies are simply "greenwashing" - pretending to care more about the environment than they really do in order to burnish their image.

BP, for example, has endured several years of bad publicity. An explosion at the British company's Texas City, Texas, refinery in 2005 killed 15 people, and a panel investigating the blast blamed the incident on lax attitudes toward safety. Last year, BP shut down half of America's largest oil field, Prudhoe Bay in Alaska, after leaks appeared in some of the field's pipelines - leaks that government officials blamed on shoddy maintenance.

"No oil company could be more desperate to repair its public image than BP," said Judy Dugan, research director for the Foundation for Taxpayer and Consumer Rights watchdog group. "It was supposed to be 'Beyond Petroleum' and then showed itself to be too cheap to do the kind of maintenance that could have prevented the refinery explosion or the pipeline problems in Alaska."

Those issues had nothing to do with BP's decision to create the Biosciences Institute, a company spokeswoman said.

"We realized there's obviously a need to provide cleaner fuels, and we don't know where they're going to come from," said Sarah Howell, corporate communications director for BP America.

The amounts that oil companies spend vary widely.

- BP created a division in 2005 called BP Alternative Energy that plans to invest $8 billion in solar, wind, hydrogen and natural gas technologies. BP designs and builds solar electric systems. The company also plans to build a Los Angeles County power plant that will take petroleum coke - a byproduct from refineries - separate it into carbon dioxide and hydrogen, burn the hydrogen as fuel and store the carbon dioxide in oil reservoirs, deep underground.

- Chevron spent about $2 billion during the last five years and will spend $2.5 billion in the next three, Paul said. The company established a biofuels unit last year and is investing in a large-scale biodiesel plant in Texas. The company has a subsidiary, Chevron Technology Ventures, that invests in early-stage energy technologies. Chevron also agreed last year to give UC Davis up to $25 million for research into renewable fuels.

Some of the money the company says its spends on alternative energy, however, doesn't pay for research. Chevron is the world's largest generator of geothermal power, and it counts money spent on those operations as part of its alternative energy portfolio. Paul said the company does not reveal how much of its alternative energy budget goes to research and development.

- ConocoPhillips spent $80 million in 2006 on technology for alternative and unconventional energy sources, although some of those sources include oil sands. The company also started producing renewable diesel derived from soybean oil in Ireland last year.

- Exxon Mobil Corp., the largest publicly owned oil company, plans to invest up to $100 million in Stanford University's Global Climate and Energy Project, which studies energy sources that have low carbon dioxide emissions. A report posted on Exxon's Web site also says the company is researching such alternative energy sources as hydrogen, but it gives no financial details.

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