Going from Bacteria to Gasoline

Robert Walsh knows oil, which is why he finds himself running a company that aims to make it obsolete. The petroleum-industry veteran spent 26 years with Shell, eventually running the oil giant's European supply operations, so he's intimately aware of the global infrastructure needed to efficiently produce, refine and distribute fuel around the world. That experience made Walsh, 49, the perfect candidate to take over as CEO at the biofuel company LS9 earlier this year. Founded in 2005 by a Harvard geneticist and a Stanford plant biologist, LS9 — so named because it is the ninth life-science company launched by the VC firm Flagship Ventures — genetically engineers industrial bacteria so that they can efficiently unlock the energy buried in plants. Turning plants into gasoline substitutes isn't new — a similar process, without the genetics, is used to convert corn or sugarcane into ethanol. Ethanol is better for the climate than oil because it creates less carbon dioxide over its lifetime, but gasoline engines need to be converted to run on ethanol, and it's too corrosive to be sent through the pipelines that transport petroleum around the world. The "renewable petroleum" that LS9's microbes produce can be put into a Saudi pipeline or your SUV's engine and is energy-rich — LS9 can tweak its biofuels to produce more power than standard biofuels. "The real advantage is that we can make a quick hit by putting renewables into existing infrastructure," says Walsh.

LS9 has attracted $20 million in funding from top investors, including dotcom veteran turned biofuel maven Vinod Khosla. Walsh says the company could go commercial as early as 2010. To make that happen, LS9 researchers will need to bring down the cost of their product from the triple digits to $45 to $50 per bbl. — competitive with that of oil — without subsidies. "Subsidies are an interesting way to start a business but not a way to continue," says Walsh. If LS9 can pull that off, he may find himself in the Big Oil business again.