Quick Memo: Algal Oils…Is the party already over?

A company that raised hundreds of millions is being sold for parts.

Algal blooms in natural bodies of water like lakes, streams, and ponds can be detrimental to fragile ecosystems they can also be harnessed for good. Certain types of algae can produce high value oils known as algal oils. The term algal oil encompasses all oils produced from algae, but they can vary depending on the source of the microorganism and how those microorganisms are fed. Algae can produce oils that are similar to oils produced by plants, but with a fraction of the water and time required by plants such as soybeans, olive trees, and palm trees. Solazyme was one of the first companies to disclose a method to have algae yield high amounts of oil in their first patent (US 8633012 B2). Solazyme claimed that they could get algae to produce oils at 50–90% of the algae’s own weight.

From AngelList

Based on how easy it is to grow algae and due to their patents Solazyme was able to raise 145.8 million dollars in capital from both private investors and the US Department of Energy. Solazyme’s goal was to utilize these sustainable bio-based oils to produce a variety of products such as bio-diesel, cosmetics, foods, and chemicals. In the years since, specifically around 2014 the price of crude oil dropped from over 100 dollars a barrel to just around 50 dollars a barrel or below. The precipitous drop in oil prices due to overcapacity of production from OPEC resulted in bio-oil companies like Solazyme to pivot to alternate uses of oil and has rebranded as TerraVia and is now part of Corbion.

Price of West Texas Intermediate in USD/Barrel and adjusted for inflation. Source here.

The use of algal oils will not be for replacement of fossil based fuels as long as petroleum prices remain near 50 dollars/barrel (it will likely stay there), but they may allow for replacement of palm oil — an oil that has devastated tropical rainforests in South East Asia. The increased demand for palm oil has caused countries to start cutting natural rainforests and to plant palm trees in order to meet the growing global demand for palm oil. Algal oils are an attractive replacement to palm oil because they do not need large swaths of land to grow. TerraVia has started commercial production of their algal oils with sites in the US capable of 20,000 MT/year and another in Brazil capable of 100,000 MT/year. However, algal oils have a long way to go since the current demand for Palm oil is estimated to be above 50 million metric tons per year.

The current stock price for Terravia according to Google.

Recently, the future for TerraVia is not looking bright at the moment, but the concept of algal oils is here to stay. The question that I still have is where did the demand for Algal oils go or was there ever any demand at all?

I’ll be following the story to see what happens to TerraVia.

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