How to Turn Cheap Natural Gas into Low-Carbon Gasoline

Open a garage door in Silicon Valley and you’re likely to find some kind of technology under development by an enterprising entrepreneur. But a gasoline refinery?

That’s what you’ll see in the back of Siluria Technologies’ outpost in an anonymous office park by San Francisco Bay. A contraption of pipes, tubing and metal cylinders of various sizes is producing low-carbon gasoline not by refining petroleum but converting methane into fuel through the use of a catalyst grown from a genetically modified virus.

This is not how ExxonMobil makes gasoline.

But the result is the same. Eric Scher, Siluria’s vice president of research and development, opens up a bottle of clear liquid produced by the pilot project and invites me to take a sniff. Yep, it’s pure petrol but without a drop of petroleum. There is one other key difference: Siluria says its gasoline carries half the carbon footprint of fuel derived from oil.

“We’re trying to build a company that enables us to utilize natural gas to the greatest extent,” said Scher. “We’re talking about making all the products people make out of oil but out of gas. That means it will be cleaner as you don’t carry the sulfur and the mercury and all the other crap that comes out of the ground in a liquid.”

“It also speaks to enabling parts of the world to become less dependent on oil than they are today,” he said.

The United States, of course, is awash in cheap methane from the natural gas fracking boom. Producing fuels from gas is nothing new. The Fischer-Tropsch method, developed in Germany in the 1920s, has been used to do just that. But it’s an expensive and energy intensive process because methane has to be first broken down into carbon monoxide and hydrogen and then that resulting synthetic gas has to be transformed into hydrocarbons that can be refined into fuel.

Using technology developed by MIT professor and Siluria director Angela Belcher, the company’s oxidative coupling of methane process directly converts methane into ethylene through the use of a catalyst that doesn’t consume energy. Ethylene, a key component of many petrochemicals, is itself a $150 billion annual business. The ethylene then can be converted to gasoline, diesel or jet fuel through Siluria’s process.

Siluria chief executive Edward Dineen estimates that at commercial scale the company’s technology can produce gasoline for about $15 a barrel, not counting the cost of natural gas. “As long oil is eight times more expensive than gas, we’ll have an advantage,” he says.

Investors apparently believe so. Such blue-chip venture firms as Kleiner Perks Caufield & Byers and Vulcan Capital have poured more than $80 million into Siluria and the company is building a demonstration plant in Texas with petrochemical giant Brascom.

Julia Allen, an analyst with market research firm Lux Research, noted that Siluria is one of many companies trying to exploit supplies of cheap natural gas to make products but that its technology appears to be unique.

“Interesting technology will only get you so far, though,” she told me. “At the end of the day you have to make your cost numbers.”

Dineen, a former chief executive of biofuels company LS9, says Siluria will soon announce a partnership with a major petrochemicals-related company he declined to identify.

“They’ll be integrating their technology with ours and licensing that to the world,” he says. “It’s another validation to the outside world that this stuff is real.”