Last week, the San Diego-based Sapphire Energy, Inc. announced a commercial partnership with the San Antonio-based Tesoro to refine the company’s algae-based “green” crude oil into fuels suitable for today’s infrastructure and engines.
(In the interest of full disclosure: Sapphire Energy, Inc. is a general supporter of the Center for a New American Security.)
“In less than one year, Sapphire Energy has started up its commercial demonstration to grow algae; has produced crude oil from our farm; and now with Tesoro as our first commercial customer, we’re providing barrels of our oil to be refined for market use,” Cynthia ‘CJ’ Warner, CEO and chairman of Sapphire Energy, said in a press release.
The volume of algae-based crude oil made available to Tesoro is small compared to the company’s refinery capacity. Sapphire today is producing about 2 barrels a day; Tesoro can refine about 675,000 barrels a day. But Sapphire is continuing to grow. “[Sapphire’s] demonstration plant was funded in part by a $50 million U.S. Energy Department grant and a $54.4 million loan guarantee from the Department of Agriculture,” Bloomberg reported. “It’s expected to produce as much as 100 barrels a day by the end of 2014.”
Tim Zenk, Sapphire’s Vice President of Corporate Affairs, told Quartz that despite the small volume of “green” crude oil that the company is selling to Tesoro, the commercial partnership nevertheless marks a watershed moment in the commercialization of renewable biofuel: “It re-enforces that the renewable crude oil we’re producing is market viable and works with the existing network of pipelines and transportation systems.”
The cost of algae-based crude is still one of the factors encumbering commercial-scale production of biofuel. According to Quartz, Zenk would not reveal how much Tesoro is paying for Sapphire’s green crude, only to say that the price has declined “as yields have increased with improvements in the harvesting and processing of the algae.”
For additional coverage, checkout Quartz report, “Why it’s a big deal that 0.0003% of Tesoro’s fuel will come from algae this year.”
As for the 2 barrels a day that Sapphire is delivering to Tesoro, Bloomberg reported that the company plans to “sell algae-derived diesel fuel it makes for off-road use, including for construction gear, farming equipment and generators.”