Specialty Chemicals Markets
Specialty chemicals are chemicals generated in production scale up to roughly 10 million lb/year, and ranging in value from a few dollars per pound up to $100s or even $1000s per lb. Specialty chemicals are components of practically all the material objects in our daily lives, including constituents of paints, lacquers, clothing, fabrics, furniture, glues, adhesives, lubricants, plastics, electronic goods, white goods, automobiles and building materials. The market for specialty chemicals is growing at up to 10%/year, depending on the chemical. The specialty chemical market will expand further as world population increases, as socio-economic levels increase and as new customers with increased purchasing power demand manufactured goods and their chemical constituents.
Specialty chemicals with the additional value of being “green” are being offered in some U.S. and European markets. This moniker can generate customer recognition and lead to premium pricing. As generally used, the term "green" means "not-from-petroleum oil". As consumers learn that "green" is not necessarily compatible with the broader consideration of "sustainability", we predict that chemical products that offer sustainability will gain market share.
Our first products will be sustainable specialty chemicals produced at relatively small volume, but in high margin market segments where sustainability is highly valued by customers. As we scale up operations, we will expand our portfolio to include chemicals addressing larger volume markets, eventually reaching the scale of “drop-in” fuels.
Diverse Product Opportunities
Oakbio microbes convert waste CO2 into all classes of compounds typical of living cells, including small metabolites, lipids, carbohydrates, proteins and nucleic acids. When fed CO2 as sole carbon source, our microbes readily make diverse high molecular weight organic acids, as well as numerous lower molecular compounds. Many of the compounds made naturally by our microbes are currently sold as valuable specialty chemicals. Several of these chemicals are sold into markets for quite different products spanning different scales of production and technical grades.
Some of our potential chemical and fuel products are not only valuable in themselves, but also valuable as precursors for other products. The petrochemical industry has developed experience with thousands of chemical transformations to create value from the particular compounds found naturally in oil. Chemical conversion steps, enzyme catalysis or additional microbial conversion steps can be used to add value to a compound produced by microbes. We will evaluate alternative process steps beyond our microbial process to determine those most compatible with overall process sustainability.
Cost-Control
Low cost carbon feedstock
Our carbon feedstock, CO2, is very low cost. We use a source of carbon generally regarded as waste. Current processes of CO2 removal from a waste gas stream are very expensive [representing 50-100% of initial capital installation cost for coal-fired power stations]. Oakbio offers value to the CO2 emitting industry by removing CO2 safely and efficiently from their waste gas stream. This opportunity creates a low-cost carbon source for Oakbio. In some regulatory environments, we envision being paid by the CO2 producer to remove their CO2 waste by our microbe.
Alternative microbial technologies for building valuable chemicals and fuels use sugars and other plant-derived building compounds as carbon and energy feedstock, purchased from an increasingly competitive commodity market.
Cost advantages of Microbial factories
In the course of evolving their metabolism for efficient growth and multiplication, our microbes perform many sequential reactions. Compounds they build up from the single carbon building block of CO2 can be purified as valuable chemicals and fuels. A single bioreactor containing microbes is analogous to a chemical refinery that makes valuable chemicals by connecting reactions in many separate reactors, each reactor being a single chemical transformation. Our microbes don’t need high temperature, high pressure and organic solvents to perform sophisticated chemistry. Traditional chemical transformations require large investments in capital infrastructure to enable multiple separate and sequential reactions and purification steps, they require high energy input, they use expensive inorganic catalysts and they also generate a toxic organic waste stream.
Our products will be cost competitive to those made by photosynthetic algae. Algal synthesis of specialty chemicals depends on sunlight. Well-controlled algal photo-reactors suitable to make valuable chemicals require expensive equipment to maximally expose all algal cells to light. Our microbes grow in darkness, operating 24/7 for maximal utilization of capital equipment investment.
Reduced Pricing Volatility
One of the many challenges facing chemicals producers is volatility in the price of inputs required to make products. Dealing with oil price volatility is an obvious challenge for the petrochemical industry, especially for commodity chemical products with lower profit margins.
Our very short value chain and use of simple feedstock provides our customers with the advantage of reduced price volatility. From simple gas inputs in a single reactor we generate complex specialty chemicals.
The current first generation biofuel industry in the U.S. also suffers from input price volatility. This industry depends on corn, for bioethanol production from cornstarch. Corn commodity prices are highly volatile and increasing generally. Use of corn to make large volumes of bioethanol is also fraught with pricing and finite-supply issues surrounding dual use of the same feedstock for food and fuel.
In the near future, second generation bioethanol, and other potential biofuels or chemicals derived from lignocellulosic biomass, will also be produced. The value chain for second generation biofuels stretches all the way from preparing and planting land with the biofuel crop, through growth and harvesting, to transporting biomass, to several steps of mechanical breakdown of biomass and pretreatment, then enzyme treatments and eventual conversion of sugars to biofuel by an engineered yeast or bacterium. Each step involves use of energy (itself subject to price volatility), labor, multiple infrastructure-intensive technologies and competing business interests. The more steps in the value chain the more risk and opportunity for price volatility.
A differentiating feature of our technology will be our ability to use low cost feedstock, derived from an unusually short value chain with reduced price volatility.
