CA Company LS9 Turns Bug Dung into Crude Oil

By Pamela Mortimer

"Ten years ago I could never have imagined I’d be doing this," says Greg Pal, 33, a former software executive, as he squints into the late afternoon Californian sun. "I mean, this is essentially agriculture, right? But the people I talk to – especially the ones coming out of business school – this is the one hot area everyone wants to get into."

Pal is referring to the genetic alteration of bugs. When the tiny, tiny creatures feed on agricultural waste such as wheat straw or wood chips, something amazing happens - they excrete crude oil.

This is not the first time agricultural waste has been examined as a source of fuel. This time, however, Pal has actual proof. The small beaker of bug excretion in Pal’s possession could actually be used to provide fuel for the common automobile. Pal isn’t quite ready to make that plunge, however, and wants to give it another month before the first car is filled up with what Pal refers to as "renewable petroleum." After that, Pal says, "it’s a brave new world."

Pal is a senior director at LS9, one of several companies around Silicon Valley that have put aside their high-tech toys and have joined in the race to be the first to make $140-a-barrel oil obsolete. "All of us here – everyone in this company and in this industry, are aware of the urgency," Mr. Pal says.

The difference between LS9 and those who have come before is that this company is not trying to completely re-engineer the global economy. Instead, LS9 is focused on creating a product that is interchangeable with oil, rather than a replacement. On top of that, "Oil 2.0" is not only renewable but is also carbon negative, which means that the emissions from the fuel will be less than what is taken from the atmosphere by its raw materials.

LS9 has already attracted the attention of Bob Walsh, an oil industry veteran who now holds the reins as LS9’s CEO. Walsh, 50, spent 26 years at Shell and most recently operated European supply operations in London. "How many times in your life do you get the opportunity to grow a multi-billion-dollar company?" he asks. The optimism is admirable coming from a man who spends his days in cubicle in San Francisco working for a company that describes itself as being "pre-revenue".

LS9’s chaotic laboratory was funded by $20 million in start up capital from various investors including Vinod Khosla, the Indian-American entrepreneur who co-founded Sun Micro-systems.

Apparently Mr. Khosla admires the efforts of LS9, a company that took a miniscule single cell organism, altered it a bit, and may have created the answer to the oil crisis.

"Five to seven years ago, that process would have taken months and cost hundreds of thousands of dollars," Pal says. "Now it can take weeks and cost maybe $20,000."