April 28, 2008

OriginOil's Microscopic Solution To Global Oil Crisis

The stakes are high for newly public company OriginOil, which has bet its business on proving that miniscule, primitive algae can solve the world's big oil crisis.

OriginOil (other-otc: OOIL - news - people ), which went public Friday, is developing a system to transform algae into a commercially viable alternative to petroleum. But the company is still in its early stages. The patent is pending on the company's OriginOil system, and its ability to create a new form of algae-derived oil for commercial use hasn't been proven yet.

OriginOil intends to create a new bio-fuel feedstock that can be used to make diesel, gasoline, jet fuel, plastics and solvents, but the company cautioned it "is in fact a new biofuel that may never achieve technical or commercial viability." If the company is successful, the potential payoff is huge.

"We like to say 'don't change the car, change the fuel,' " said OriginOil President Riggs Eckleberry. "We believe that alternative energy sources like hydrogen and solar power are attractive but will take decades to phase in because they will require new infrastructure … it is scientifically known that microalgae is a fast-growing organism that naturally produces oil as part of its biological process. Certain strains of microalgae can contain as much as 60% of their dry weight in oil."

Furthermore, algae-derived energy is as green as it gets, according to Eckleberry.

"Algae lives on carbon dioxide so if you start to grow algae, it's eating up lots of carbon and putting oxygen into the air. So whatever you burn for energy, you're more than offsetting the carbon released. It's carbon neutral," Eckleberry said.

With oil prices at record highs and biofuel production straining the world food supply, investors are eager looking for alternatives--and algae offers a two-in-one solution. The by-products of algae oil extraction are oil and algae biomass, which can be used for biofuel or animal feed.

OriginOil's system rapidly grows microalgae and then "cracks" it to extract algae oil. For a primitive energy source--much of the world's oil and gas is made up of ancient algae deposits--the high-maintenance organism requires sophisticated technology for its cultivation and oil extraction. Algae demand a light, fluid and calm environment.

"One of the primary challenges is how to optimally introduce carbon dioxide and nutrients needed by the growing algae culture without disrupting or over-aerating it," the company said. Additionally, algae are protected by a tough cell wall that must be cracked to extract the oil, a high-energy process.

"The challenge is to maximize oil yield by cracking as many of the algae cells as possible with the smallest amount of energy," said OriginOil.

The technology company, which doesn't intend to manufacture algae feedstock or oil, aims to make its technology modules globally available so that everyone has access to low-cost energy.

"Where we're making a real difference is, we have the technological breakthroughs in growth and extraction. Once people get our module, all they have to do is add water and it runs on solar energy. If you want people all over the world to adopt algae energy generation, you make it simple and easy to adopt," Eckleberry said. "That's how we're hoping to accomplish large-scale production."

On Friday, OriginOil publicly offered up roughly 32.0 million shares Friday on behalf of early investors in the company. The stock is being sold for 10 cents a share, relegating it to trade over-the-counter since the share price is lower than the minimum required by the exchanges.

As IPOs go, however, it went well. The stock price was up to 20 cents a share during Friday's afternoon trading.

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