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Sapphire Squeezes Oil From Bacteria

SAPPHIRE ENERGY INC.

CEO: Jason Pyle.

Financial information: More than $100 million in venture funding raised, plus a U.S. grant exceeding $104 million.

No. of local employees: 100.

Investors: Monsanto Co., Arch Venture Partners, Wellcome Trust, Cascade Investment and Venrock.

Headquarters: Torrey Pines area of San Diego.

Year founded: 2007.

Company description: The privately held company focuses on what it calls ‘green crude’ production — using synthetic biology to transform algae into gasoline, diesel and jet fuel.

Key factors for success: Sapphire has been able to demonstrate that its crude oil could be used as a drop-in replacement for fossil fuels.

San Diego biofuels company Sapphire Energy Inc. has struck a deal with Irvine-based Earthrise Nutritionals LLC in a move to expand its inventory of algae strains used to create so-called “green crude” oil that can replace fossil fuels.

Under terms of the deal, Sapphire will license Earthrise’s strain of spirulina, also known as blue-green algae, said Tim Zenk, Sapphire’s vice president of corporate affairs.

Having access to the additional strain will ultimately help Sapphire lower its costs, giving the company greater “operational leeway and efficiency,” Zenk said. “This opens up a whole new area of plants that can be used for production.”

Earthrise Nutritionals said it has been growing and harvesting blue-green algae for more than 20 years. The company sells the product in health food stores such as Whole Foods, marketing it as a nutrient-rich superfood that strengthens the immune system and helps protect against various diseases.

Hiro Mochizuki, president and CEO of Earthrise Nutritionals, said the company fully embraced the chance to get involved in efforts that expand beyond dietary supplements. “There is no doubt about the opportunity for algae-based alternative fuel,” Mochizuki said in a statement.

Neither company would disclose financial details of the licensing agreement.

A Strain With Strength

Though they look similar to the untrained eye, blue-green algae are genetically different from the green algae. In fact, they’re not technically algae at all; they’re bacteria —cyanobacteria, to be exact. And up until very recently, no one in the biofuels business believed that cyanobacteria could produce oil.

That changed after Sapphire conducted experiments using a new extraction technology at its San Diego lab, and then replicated the results at its Las Cruces, N.M., production facility, Zenk said.

“What the Sapphire deal shows is that the technology is advancing very quickly,” said Steve Mayfield, a professor of biology at UC San Diego and director of the San Diego Center for Algae Biotechnology, a consortium of regional research institutions and companies.

“Two years ago cyanos were considered fast growers with no oil potential and today they are considered good enough for production,” Mayfield said. “That shows how fast we are making progress.”

Zenk said blue-green algae are very robust plants that can grow outdoors in extreme conditions. They also are resistant to infection. But perhaps most importantly, “we’re able to get very high oil content out of it,” he said. “Our technology unlocked its use for energy production.”

Zenk noted that Sapphire is not known for partnering with other companies, but it made sense in this case because Earthrise Nutritionals has so much experience in developing strong strains of cyanobacteria. “We didn’t want to start from ground zero,” he said.

End Goal in Mind

Sapphire creates renewable crude oil that can be processed in existing refineries into jet fuel, diesel and gasoline. These drop-in replacement fuels are molecularly identical to fossil fuels and are compatible with existing infrastructure and engines, the company said.

Adding blue-green algae to its existing inventory of green algae will help Sapphire reach its ambitious goal to produce 100 million gallons of algae-based fuel per year by 2018, and 1 billion gallons per year by 2025. The company’s target customers include the U.S. military and commercial airlines.

The 155-person company already has attracted the attention of other high-profile investors who are confident in its prospects for becoming a major producer of renewable fuel. Since 2008, Sapphire has raised more than $100 million from investors that included Arch Venture Partners, Wellcome Trust, Cascade Investment LLC (owned by Bill Gates), and Venrock, the venture capital arm of the Rockefeller Family. The company also won $104.5 million in federal grants for its algal bio-refinery in New Mexico.

In December, Sapphire was chosen by Forbes for its list of America’s Most Promising Companies, and was also identified as one of 16 early-stage companies to watch.

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