www.iris.no

© This document may only be reproduced with the permission of IRIS or the client.

Our activities are in accordance with the quality assurance system NS-EN-ISO 9001:2000 and NS-EN ISO 14001:2004

Arild Johannessen, (IRIS)

Gunnar Kleppe (Prekubator)

Utredning for Gassbasert fermentering som en norsk teknologi med nasjonale og internasjonale muligheter

Report IRIS – 2014 / 7941934

Prosjektnummer: 7941934 Prosjektets tittel: Utredning for Gassbasert fermentering som en norsk teknologi med

nasjonale og internasjonale muligheter

Oppdragsgiver(e): Innovasjon Norge

Forskningsprogram: ISBN: Gradering: Åpen

Stavanger / 25.03.2014

Arild Johannessen Prosjektleder

Sign.dato Cathrine Boccadoro Kvalitetssikrer

Sign.dato

Dominique Durand Senterleder IRIS-Biomiljø

Sign.dato

www.iris.no

© This document may only be reproduced with the permission of IRIS or the client.

Our activities are in accordance with the quality assurance system NS-EN-ISO 9001:2000 and NS-EN ISO 14001:2004

www.iris.no

© This document may only be reproduced with the permission of IRIS or the client.

Our activities are in accordance with the quality assurance system NS-EN-ISO 9001:2000 and NS-EN ISO 14001:2004

1.1 Sammendrag Naturgass representerer en unik råvare for bruk innen bioteknologisk produksjon av bulk mengde produkter til ernæring og kjemisk industri ved at det finnes bakterier som kan omforne gassen til en rekke sluttprodukter med vesentlig verdi. Prisutviklingen av karbonholdige råvarer for fermenteringsbasert industri viser nå at naturgass representerer det klart billigste alternativ og dette har medført en vesentlig ny interesse på internasjonal basis for å ta i bruk gassbasert fermentering som nøkkel- teknologi for produksjon av en rekke ernærings- og kjemiske produkter. Denne type teknologi representerer en miljøvennlig anvendelse av naturgass og anses som en naturlig del av den såkalte bioøkonomien som nå implementeres i den fleste industrialiserte land med mål å benytte fornybare ressurser som utgangspunkt for produkter som vanligvis baseres på oljebaserte råstoff. Norge er i en særstilling hva angår storskala gassbasert bioteknisk produksjon da reaktorteknologien og grunnleggende kunnskap om produksjonsorganismene som denne produksjon er baseres på er utviklet og kontrollert av norske interesser. Det faktum at vi har tilgang på ubegrensede mengder naturgass, kjølevann, energi og kompetanse danner et svært godt grunnlag for å etablere ny industri i Norge for storskala industriell produksjon av særlig fôrprotein og plattformkjemikalier. Slik industriell produksjon vil åpenbart ha positive synergistiske ringvirkninger med annen norsk industri der bioøkonomibegrepet er bærende. Teknologien for produksjon av fôrprotein er ferdig utviklet til industrialisering, og sammen med fôrindustrien er hele verdikjeden på plass i Norge. Produksjon av plattfromkjemikalier vil derimot kreve at det satses nasjonalt på nødvendig FoU, prosessutvikling og kommersielle aspekter påkrevd for etablering av en ny type industriell aktivitet i Norge for et internasjonalt marked der store aktører er dominante.

For å kunne etablere en gassbasert bioteknologisk industri i Norge anbefales følgende:

• Ressurser bevilges for gjennomføring av FoU prosjekter som fokuserer på følgende tema;

o Videre forretningsutvikling for å etablere et norsk nav for gassbasert fermentering.

o Bruken av metanotrofe bakterier som en modell for å etablere syntetisk biologi som et norsk ekspertiseområde

o Som tiltrekker industrielle aktører som har egen aktivitet innen syntetisk biologi med mål å etablere produksjonssystem som kan anvende naturgass som råvare

o Oppstrøms- og nedstrøms prosesskontroll og prosessoptimering

• Støtte for å etablere en demo enhet for gassbasert fermentering

o Prosess optimering i en reell reaktorenhet

o Design og tilpassing av fermentor.

www.iris.no

© This document may only be reproduced with the permission of IRIS or the client.

Our activities are in accordance with the quality assurance system NS-EN-ISO 9001:2000 and NS-EN ISO 14001:2004

• Støtte til forretningsutvikling, strategiutvikling og kommersialisering

o Forretningsutvikling, nettverksutvikling nasjonalt og internasjonalt

o Markedsstudier.

Stavanger /, 24.03.2014

Arild Johannessen

www.iris.no

- 5 -

Contents 1.3 Natural gas can be utilised as a Norwegian asset for entering the

bioeconomy ............................................................................................................................. 6 1.4 Carbon sources available for industrial fermentation. ............................................................ 7 1.5 Natural gas as source for fermented products. ....................................................................... 8

2 COMMERCIAL ASPECTS OF NATURAL GAS AS AN INDUSTRIAL FEEDSTOCK ..................................... 9

2.1 Pricing and availability of natural gas ...................................................................................... 9

3 ADVANTAGES IN USING NATURAL GAS IN LARGE SCALE BIOLOGICAL PRODUCTIONS IN NORWAY. ............................................................................................................ 11

3.1 Technological status for large scale natural gas based fermentation. .................................. 11 3.2 Key R&D competence available in Norway. .......................................................................... 11

4 INITIATIVES NEEDED FOR ESTABLISHING INDUSTRIAL GASEOUS FERMENTATION IN NORWAY. ..................................................................................................................................... 14

4.1 Nutritional products produced from natural gas. ................................................................. 15 4.2 Biotechnological production of C2- C5 components. ............................................................ 15

5 REQUIREMENTS TO MAKE NORWAY AN INTERNATIONAL HUB WITHIN GAS BASED FERMENTATION PROCESSES. ............................................................................................... 16

5.1 National requirements for R&D and education on production organisms. .......................... 16 5.2 R&D need for process development of gas based fermentations. ....................................... 16 5.3 Requirements for establishing a gaseous fermentation hub. ............................................... 18 5.4 Strategic domestic and international alliances within R&D and

commercialisations. ............................................................................................................... 18

6 BARRIERS AND COMPETITORS. ........................................................................................................ 19

7 OTHER IMPLICATIONS ...................................................................................................................... 19

7.1 Commercial implications for Norway .................................................................................... 19

8 RECOMMENDATIONS ...................................................................................................................... 20

9 APPENDIX ......................................................................................................................................... 22

www.iris.no

- 6 -

1.2 Introduction. Over the last two decades developments in biotechnology have become key for the environmentally friendly and sustainable production of a number of compounds within health, agriculture, energy and industry. This ongoing commercial growth has led to the development of a bioeconomy in which a substantial share of the economical output is very much dependent on the development and use of biological materials. The development of such a bioeconomy has become part of the policy making in OECD (OECD: The Bioeconomy to 2030) countries as well as the EU (BECOTEPS 2011:The European Bioeconomy in 2030). The sustainability principle with respect to starting materials is a key element in the “bioeconomy”, and the EU policy is to make a gradual change to a post-petroleum economy as a necessity to meet the environmental challenge. Carbon is a key feedstock for the industrial production of everyday products such as food, feed, fibre and fuel. Fermentation in general, as well as fermentation based on natural gas, represent environmentally favourable technologies for converting simple carbon molecules into more complex molecules. Sugar has traditionally been used as a carbon source in fermentation processes. However, natural gas is gradually becoming an inexpensive source of carbon that is available in large quantities for the fermentation industry. Through gas based fermentation, it is now possible to produce several bulk types of products including single cell proteins and platform chemicals in processes seen as a semi sustainable and it has become an acceptable way of using a fossil energy source.

Based on the existing Norwegian technology for gas based fermentation and access to large volumes of natural gas, Norway could become a major industrial player in biotechnological production of nutritional and chemical compounds.

1.3 Natural gas can be utilised as a Norwegian asset for entering the bioeconomy

The idea of using methane in natural gas as a carbon/energy source in fermentation was initially developed and commercialized by the Norwegian company Norferm AS for its production of the single cell protein, BioProtein. Unfortunately the company had to stop its production in 2006 due to the low market price of its product despite being very well received by the salmon feed industry. However, the use of gas in fermentation processes has for years continuously been addressed by the industry as well as the scientific community due the availability and favourable price of natural gas. Since the closing down of Norferm, major changes in the commercial setup have been observed as protein prices have increased while natural gas prices have remained constant, or even reduced in some regions. This has opened up new possibilities for re-establishing this technology as a viable commercial process.

For Norway, as a major natural gas producer, gas based fermentation represents a unique possibility with respect to using natural gas as a “biomass” for a diversified industrial production of new compounds. This is due to the fact that local key competence exists and the technology for producing single cell proteins is fully scaled up to commercial production. Furthermore, the technology is controlled by Norwegian interests. A large Norwegian market exists within the aquaculture industry, which is dependent on high quality proteins such as

www.iris.no

- 7 -

BioProtein for further growth. A market segment of BioProtein to the salmon industry up to 150 000 tonnes per annum is well documented.

Biotechnological production of platform chemicals on natural gas as input material for the production of a range of products represents a new and rapidly developing industrial trend. Investing in further R&D including commercialization strategies, knowledge and infrastructure, single cell protein technology can be further developed and commercialized in Norway to become the main technology for the production of compounds for extensive worldwide markets. BioProtein represents a unique production technology, and could become a significant Norwegian asset for developing this type of technology into commercial productions. The BioProtein technology can act as a stepping stone for R&D in the field of platform chemicals which will position Norwegian R&D communities as leading partners in developing the bio-economy.

1.4 Carbon sources available for industrial fermentation. Traditionally, sugar has been used as the main carbon source in the fermentation industry. For the production of large volumes of products, sugar is considered expensive and low in carbon and energy. Consequently, it is not the ideal raw material and the industry is looking for alternative simple raw materials available in large quantities at a low price for use in typical bio economical processes. Natural gas represents an ideal industrial carbon source due to its composition and price, and initiatives are currently taken worldwide to convert sugar based processes into processes based on natural gas. Integral to this process is the development of production organisms that can convert natural gas into a variety of products.

Compared to traditional chemical processes, biotechnological production processes based on natural gas are of special interest because such systems can utilise natural gas directly without having to apply high temperatures or pressures. Such processes thereby operate under environmentally favourable conditions.

A theoretical comparison of methane and sugar in terms of availability and price show that methane in natural gas can be the basis for the large scale production of a variety of compounds, while sugar is limited to higher value lower volume type of products (see Figure 1).

www.iris.no

- 8 -

Figure 1: Methane in natural gas is a high volume, high energy, and low price source of carbon which will enable a number of products to be produced economically. Source Calysta Energy

This report will thus focus on the use of methane from natural gas as a Norwegian source of carbon that could give Norway a competitive edge compared to other European countries in the industrial production of proteins and platform chemicals.

1.5 Natural gas as source for fermented products. Over the last two decades, renewed interest in using natural gas as a fermentation substrate has developed mainly due to the following reasons:

1. The abundance of natural gas as a carbon and energy source at a favourable price. This also includes biogas as its production has improved dramatically.

2. Technical development of large scale production systems utilizing methane and methanotrhopes for the production of single cell proteins.

3. Fermentation using natural gas is considered environmental friendly due to the fact that this technology does not utilize agricultural products and requires only limited amounts of water.

4. Recent advances in molecular biology/genetics on methanothropes have meant that recombinant methanotropes able to produce many compounds ranging from colorants to low molecular platform chemicals are now available to the chemical industry for commercial production..

Based on naturally occurring as well as recombinant microorganisms, the Norferm AS technology seems to be the most advanced available today. This technology provided solutions to the most challenging parameters of natural gas fermentation, including the mass transfer rate of gases into the water and developing a bacterial community that can handle higher

www.iris.no

- 9 -

alkenes in natural gas using a continuous fermentation in large scale. A very clear understanding from the experience gained so far from studies and commercial activities is that such gas based fermentations are very well suited for large scale operations, producing thousands of tones in continuous fermentation operations.

2 Commercial aspects of natural gas as an industrial feedstock

2.1 Pricing and availability of natural gas Vital to the interest of industrial use of natural gas as a feedstock is its price and availability. For the production of chemicals, it is the energy content combined with the carbon content that is the most valuable. In biological productions it is more the content of methane in the natural gas that is given value. A comparison of carbon prices are given in Figure 2 and shows that natural gas represents the most energy rich and cheapest source of carbon available.

Figure 2: Natural gas represents the cheapest source of carbon available for fermentation. (Natural gas price is based upon Henry Hub USA). Source Indexmundi.com

Even though the price of natural gas is among the lowest prices of energy and carbon today, it is important to understand future prospects.

Current prices and availability for natural gas vary from region to region in the world, and in the last 5 years a clear geographical diversification has been observed (see Figure 3). The reason for this is local differences in natural gas availability combined with cost of processing- and logistics prior to export. Also important in the current pricing are the long term contracts previously used where natural gas was benchmarked to oil price. In the current market a trend

0

0,5

1

1,5

2

2,5

3

3,5

4

US$/Kg

US¢/MJ

US$/karbon

www.iris.no

- 10 -

towards spot pricing of natural gas is observed. Spot pricing at geographically distributed hubs has historically been used in North America. Such hubs in which markets price is set according to demand and availability, are currently also being established in Europe.

Today, prices in the Americas and the Middle East are low, while prices in Western Europe are still considered high. Prices in Asian countries such as Japan, Korea and Taiwan are even higher mainly due to the import of large quantities of LNG in order to compensate for power previously produced by nuclear power plants in Japan. In the Middle East, natural gas is either flared or domestically used for electricity production or industrial use (not Qatar) and prices of approximately half the US prices are observed.

There are two main drivers for the low price in the Americas: 1) new technological achievements making shale gas commercially available in the USA and Canada, and 2) highly developed system for logistics where natural gas is being traded according to spot prices at selected hubs.

Due to the fact that shale gas has been made commercial available it is forecasted that the USA will be transformed from a net importer of natural gas in 2010 to an exporter in 2020.

Figure 3 Price of natural gas among different geographical regions. Source IEA, SSB

Given the volumes of natural gas available, it is considered the most interesting source of carbon for industrial production including biological production. The development of future European price regimes for natural gas is dependent on political aspects as well as production parameters. Presently the Norwegian domestic market for natural gas is limited and no competition among sellers is seen. Furthermore, we see few signs of increased domestic use of natural gas, and no domestic price mechanism has been established. The methanol plant at Tjeldbergodden is the only major industrial user of natural gas in Norway today. Future pricing

0

2

4

6

8

10

12

14

16

18

2006 2007 2008 2009 2010 2011 2012

USD

/MM

BTU

Year

Japan (LNG)

USA (pipe)

Belgium (pipe)

Germeny (pipe)

Spain (pipe)

Norway (export)

www.iris.no

- 11 -

of natural gas for domestic use will of course depend on world market developments and possibly also the demand for gas in Norway. It is however expected that the prices in Europe will decrease thereby giving a sound basis for industrial establishments in Norway. Being a major gas producer/exporter, where transportation and processing of natural gas adds significantly to the final production cost of the gas, a diversified gas price regime could be developed in Norway. Gas delivered at the domestic field terminals could have a lower market price than at an LNG or gas pipe terminal in Europe or Japan. Such diversified pricing along with a decreasing world market gas price would be ideal for the establishment of a gas based industry in Norway. A gas price where the value of the final product is taken into account could also be the basis of a Norwegian gas price regime. A political process should be initiated in order to support the establishment of a Norwegian gas based industry.

3 Advantages in using natural gas in large scale biological productions in Norway.

3.1 Technological status for large scale natural gas based fermentation.

The technology developed by the Norwegian company Norferm As is the only proven large scale gas based biological fermentation. The core of the technology is the use a consortia of microorganisms combined with a unique fermenter design which successfully led to the industrialization and large scale production of the single cell protein BioProtein used in salmon feed. This technology is now owned and controlled by the Norwegian company BioProtein AS which has continued its R&D on this process as well as the use of the product in projects sponsored by NFR grants. The most recent development in gas based fermentation is the use of methanothropic bacteria to produce a variety of platform chemicals using the Norferm reactor. All the requirements for developing a unique and prosperous technology for large scale bio-production of platform chemicals and nutritional products are therefore already in place. Through new and relatively limited R&D initiatives along with improved infrastructure, tailor made microbial production strains combined with specially designed gaseous fermenters could be developed into a unique Norwegian technology for a range of products to be produced domestically and internationally

The main driver for using biological production methods to utilise the methane is that they do not require high temperatures and pressures in contrast to current chemical processes.

3.2 Key R&D competence available in Norway. Historically, gas based fermentation has gained limited attention among the Norwegian research communities. Two main factors changed that situation during the late eighties; 1) it became clear that Norway would be a major gas producer for many decades to come and 2) the salmon aquaculture industry will depend on the availability of large volumes of protein feed of fish meal qualities.

www.iris.no

- 12 -

This situation resulted in the initiative from the Norwegian companies Nycomed and Statoil to invest in the finalization of the Norferm single cell protein technology. Having no basic competence in this technology themselves, they relied on Norwegian universities and institutes. Strain properties, fermentor technology, and nutritional properties of the single cell protein are all fields of expertise in which Norwegian institutions have contributed. This process resulted in the following competences being developed:

• The University of Bergen was appointed to establish relevant and required competence on properties/stabilities of the bacterial strains used in the production of BioProtein. This involved studies such as gene sequencing, genetic stability, immunologic properties, mineral requirements and key growth parameters. The R&D from the university provided important input to the development, scale up and length of the fermentation/production runs. This work also lead to the establishment of an international network on methanothrophes, resulting in several scientific publications. The genome sequencing of the key bacteria used in the Norferm process Methylococcus capsulatus, was the first in Norway. Much of the competence established in Bergen is still there for renewed studies in areas such as metabolic pathways and recombinant systems for production of platform chemicals.

• NTNU played an important role in the final overall design of the reactor and the more detailed design of head space of the reactor with respect to gas separation and safety of that part of the reactor. This competence will be of great importance when it comes to the need to design reactors for gaseous products. The input from FRAMO related to the pumping system of the reactor is also of importance connected to the NTNU competence on large reactor design. NTNU also has a rather broad polymer chemistry competence found in the Department of chemical process technology as well as in the Uglestad Laboratory. This activity is of importance for renewed developments within gas based fermentations.

• NMBU/NOFIMA took a leading role in studies on the nutritional, health and feed technological properties of BioProtein and later on commercial potential/properties of colorants for salmon feed made by a methanotrophic bacterium. This product was later developed by DuPont. The research has been going on up until now and has resulted in an extended number of publications, PhDs and patents. Through this R&D program, NMBU/NOFIMA has gained a position as the most experienced institutions worldwide on the properties/use of single cell products for feed purposes. On these topics Norway is very well positioned to take on new initiatives and products based on natural gas or feed and may be also for food purposes.

• IRIS has over the last six year period gained important expertise on key production parameters and process control for natural gas based

www.iris.no

- 13 -

fermentations, based on pilot fermentations on laboratory scale. Based on the experience and production data from the industrial pilot operated at Tjeldbergodden, IRIS has focused on the more delicate and key parameters which have major impact on the productivity and stability during extended production runs of more than two months. In a parallel activity IRIS has also gained important experience within new developments on reactor design for the loop type of reactor developed for the Norferm technology. This activity has been organized as support to the company BioProtein AS which is about to license the BioProtein technology to a commercial production company in Malaysia.

• Polymer chemistry at UiO/ Norner. Competent scientific groups covering wide areas of polymer chemistry such as catalyst, reactors, materials/composites, adhesives colloids and nano science are found at UiO and the independent Norner Institute. These institutions will be fully competent to serve as partners in process/products development base on platform chemicals coming from gas based fermentations.

In summary it is believed that Norway has critical and key R&D competence which will be essential for a good starting point for a renewed, national effort to develop a complete platform involving R&D as well as production units for gas based fermentation. A complete R&D platform should be based on competence within the following areas:

• Bacterial strain development including engineering of metabolic pathways and recombinant systems

• Process control and production optimization

• Large scale reactor design

• Downstream processing of all possible product types

• Nutritional studies where applicable.

• Polymer chemistry

• Product strategy and synergies with other industries

• Commercial strategies and robustness of gas based fermentations.

As a summary, Norway has the following advantages for the utilisation of methane for bio-production.

www.iris.no

- 14 -

• A validated unique process for large scale fermentation for the production of BioProtein using a consortia of microorganisms combined with a unique fermenter designed for the purpose

• IP and experience of the industrial scale gaseous fermentation is controlled by Norwegian interest through the company BioProtein AS.

• Norway has large scale access to high quality natural gas sources, and several sites along the Norwegian coast can facilitate such production

• A large aquaculture industry with major players that are large scale off takers of the product

• In depth knowledge of the nutritional value of BioProtein at NMBU

For the production of platform chemicals, it is apparent that such production has to be linked to relevant types of chemical industries. Such competence can be found in the Greenland area with Ineos, Yara, Norsk Hydro and Norner as major players.

4 Initiatives needed for establishing industrial gaseous fermentation in Norway.

The use of natural gas in microbiological production has recently been actualised by the following facts:

• Increased availability and spot pricing of natural gas has altered the commercial setting of natural gas into a normal commodity with its own independent pricing

• Technological achievements in large scale production and synthetic biology have opened up new technological windows for production of platform chemicals.

• The feed and food industry needs for high quality proteins that are not influencing the food chain.

Recent advances in biotechnology combining molecular biology, sequencing, bioinformatics and systems biology have defined a new field of biotechnology: synthetic biology. It has enabled economical and sustainable production of several chemicals going into everyday materials such as food, feed, fibres and fuels. Therefore there is a trend in the chemical industry to develop technologies that convert production into biologically processes. In addition to the economic benefits, biological productions are considered more environmental friendly.

www.iris.no

- 15 -

Based on the changes in the natural gas market, and the fact that it will be available at a low price for a long period of time, a strategic change in raw material policy is developing among the chemical and biochemical industry worldwide. Recent developments in biotechnology and the fact that Norferm was able to validate a large scale single cell protein fermentation technology, has resulted in an increased interest in gas based fermentation both for nutritional purposes and for the production of platform chemicals.

4.1 Nutritional products produced from natural gas. The Norferm technology for producing single cell protein is ready to be industrialized. The final product, BioProtein, is very well characterized with respect to its nutritional properties which are comparable to the best quality fish meal. Key properties such as amino acid profile, digestibility and feed gain are well documented in numerous animal trials involving different livestock animals. BioProtein is approved to be used in feed for most domestic animals as well as for key aquaculture species. The market for chicken and salmon is already established and major advantages of this feed are the high protein content, and that the fact it does not use cultivable land for its production. The market for BioProtein in chicken- and aquaculture feed is estimated to reach a million tonnes over a ten year period.

4.2 Biotechnological production of C2- C5 components. As methane based fermentation processes are designed for large scale operations, the type of products to focus on are bulk type with industrial applications. The production of platform chemicals has therefore been of special interest. These are typically molecules of 3-5 carbon atoms which are used as building blocks in chemical reactions.

Based on the sequencing of M.capsulatus performed at University of Bergen and the subsequent analysis of metabolic pathways, it is clear that this organism can be developed into a vehicle for the production of several such platform molecules as exemplified in Table 1 (appendix)

Recent advances the gene modification technology and large scale production combined with changes in the natural gas market have opened a new market for the BioProtein technology. BioProtein AS has gained interest from several major other companies in the field of biological production of such chemicals. Many of the companies that see gaseous fermentation as a strategic technology are major industrial companies (see appendix 1). BioProtein AS has established relations to several of these for the development of gaseous fermentation processes based on its unique and patented large scale reactor technology. The market for platform chemicals is in the millions of tonnes and a more dedicated market analysis should be performed in a follow up report.

www.iris.no

- 16 -

5 Requirements to make Norway an international HUB within gas based fermentation processes.

To establish Norway as a hub for gaseous fermentation, R&D has to walk hand in hand with commercial interests. The foundation for establishing such a hub already exists in that the main components for the technology are developed and controlled by Norwegian interests. Moreover on-going R&D topics that can support such an industry are found at Norwegian R&D institutes and universities. However, it is a requirement that relevant future R&D has to be coordinated and organized into commercial value chains that are focused on the strategic development of such a multidisciplinary technology.

5.1 National requirements for R&D and education on production organisms.

The production of platform chemicals is very R&D intensive as each organism has to be tailor made for each chemical produced. The expertise required includes traditional genetic engineering combined with systems biology, both of which are present in Norway as separate competences at different R&D institutions. But as far as we know, no R&D institution has so far been able to combine these into what is called synthetic biology. Using the gaseous fermentation technology developed by Norferm combined with industrial biotechnology, a unique Norwegian resource can be used as a stepping stone for entering this new and important field of expertise, which has the potential to develop several new innovations as well as commercial opportunities.

5.2 R&D need for process development of gas based fermentations.

Gas based fermentation should preferentially be used in large scale operations where continuous fermentations with lengths of two months or more are possible. Such rather unusual operations do require that the process control and reactor design are as close to ideal as possible. Experience from the pilot industrial plant at Tjeldbergodden clarified that the loop reactor used there should be the basis for further developments and improvements for future operations. Such a loop reactor relies on having full control of major process units such as; CO2 control and removal, detailed control on growth components and physical/chemical production parameters. In order to support the development of updated process equipment for gas based fermentations and subsequent commercialization in Norway, we believe that R&D activities should be initiated in the following areas;

Process optimization for new and different product classes based on recombinant production organisms. This includes growth substrate, CO2 sensitivity, strain productivity, product

www.iris.no

- 17 -

inhibition, optimal length of continuous production runs and downstream capture of the compound of interest etc.

Process control/media components. Continuous fermentations require continuous addition/control of growth components, control of oxygen/pH/CO2 level throughout the reactor and control of product inhibition/product removal. Some of these parameters such as mass transfer and CO2 control have to be studied in a loop reactor in order to simulate the condition in a commercial scale reactor.

Reactor design. As discussed above we suggest that the industrial reactor to be used in future large scale gas based fermentations should be based on the overall design of the Tjeldbergodden reactor. Based on the experience from the operations for producing BioProtein as well as the new ideas coming up on production of platform chemicals, some of which are gaseous products, there will be a need for reactor adjustments to meet specific requirements. In design studies the following topics should be addressed;

• main reactor design with respect to overall size,

• mass transfer capacity and use/design/localization of static mixers

• Engineering of attached equipment vital for extended production cycles

• pumps and liquid speed

• cooling system design and capacity

• size and localization of off gas areas for removal of CO2 and gaseous products

Downstream process. Depending on the product, different designs for its harvest and reuse of fermentation liquid has to be made. These parameters will have a very critical impact on the cost and efficiency of the process in question and should be addressed early in a planning process,

At present limited projects and knowledge have resulted in few initiatives in combining competences into synthetic biology. To develop this technology into a Norwegian industry, R&D in the field of synthetic biology needs to be intensified.

Moreover, to utilize the full potential for this technology, competence in organic chemistry and nutrition is important to fully be part of the value chains that are developed in this field of experience.

www.iris.no

- 18 -

5.3 Requirements for establishing a gaseous fermentation hub.

A pilot/demo facility/centre for gaseous fermentation is suggested as a key infrastructure and hub for R&D, technical and commercial activities necessary for the development of this technology. This facility will be a R&D and demo facility for the above mentioned need for process development, as well as being a key unit in projects developing new production organisms. Business development for this technology will be attached to this centre through companies such as BioProtein AS, as well as international industry partners. Through its competence and network building, this centre will function as a key player in supporting R&D projects developing new production organisms and processes. Projects on development of production organisms should be attached to R&D institutions involved in advanced molecular biology, systems biology and bioinformatics, and coordinated into a synthetic biology setup.

In is estimated that a pilot/demo facility would cost in the range of 20 MUSD depending on size and complexity. In addition, R&D programs need funding over a minimum of five years periods for the initiation of synthetic biology projects and R&D projects improving the process technology.

5.4 Strategic domestic and international alliances within R&D and commercialisations.

National alliances. Following the closing of the Tjeldbergodden plant, the BioProtein technology has been taken care of and further developed by the company BioProtein AS. This company, owned by IRIS, NMBU and Stiftelsen universitetsforskning in Bergen has managed to continue relevant research on methanothropic bacteria, process optimization and product properties in such a manner that commercial licenses for large scale production units now can be offered.

An initiative for revitalizing the use of methanothropic bacteria as work horses for gas based fermentations and production of a diversified product portfolio should be based on the framework that these owners of the technology represent. The established networks can benefit from being continued and further developed. The competence on reactor design, process control and infrastructure at IRIS can be strengthened by as collaboration with NTNU. In addition UiB/Uni Research would benefit from extending its capabilities within molecular- and systems biology to meet the requirement from the industry to develop production organisms for many different classes of products. As of today few industrial partners in Norway seem to play a commercial role along with the R&D suggested in this report. Companies such as Yara, Borregaard and Ineos could be candidates in years to come.

International alliances should be established in addition to the Norwegian R&D consortium as soon as possible and four industrial segments seem attractive in this respect;

www.iris.no

- 19 -

1. R&D based collaboration with commercial companies focussing on the development of production organisms.

2. Large and very competent chemical companies planning to use gas based fermentation for the production of platform chemicals.

3. International traders of feed protein components primarily for the aquaculture market.

4. Commercialization competence and policy of large scale industrial businesses producing bulk quantities of chemicals and nutritional products based on natural gas.

6 Barriers and competitors.

Presently prices of natural gas obtained in the European gas market compared to the American market is seen as an obstacle for establishing commercial production of either nutritional or platform chemicals in Norway. Geographical differences in pricing of natural gas will be a key to where the industries utilising natural gas will be established.

For the production of platform chemicals, gene modification technologies are presently developed and controlled by US entities. To finalise commercial gaseous fermentation processes into a Norwegian production system, international cooperation has to be established between the different IP owners. The IP for the production system owned by BioProtein AS is a key for establishing any production line.

Competing technologies are currently petro chemistry as well as biological productions based on sugar or synthesis gas.

7 Other implications

7.1 Commercial implications for Norway The establishment of a new gas based fermentation industry in Norway will have implications in aquaculture, agriculture, biotechnology, gas based chemical industries and also bio-refinery. It will be a first achievement for using natural gas as an industrial basis in Norway, which is a goal set by the present government. Norway is well suited for such production as it has access to all the natural resources needed for this industry, including clean natural gas, cooling water, electrical power, as well as the competence required. Typical locations for the establishment of such a production are at landing sites for natural gas, which can be found from Kårstø in Rogaland, up to Melkøya in Finnmark. A typical production site will employ approximately 50 persons with competences in biotechnology and process technology as key personnel. In designing and construction of up-stream facilities, typical industrial vendors will be used.

www.iris.no

- 20 -

As off takers, local aquaculture industry as well as the agricultural meat and milk producers will be important as they all depend on imported proteins for continued developments. A local production of gas based proteins will drastically reduce the import of high quality proteins for the production of salmon feed. The fact that the major salmon feed producers worldwide are controlled by Norwegian interests could also lead to the development international markets for feed proteins produced locally in Norway. A full value chain from production to use of nutritional proteins can easily be established in Norway where a market potential of more that 100.000 tonnes pr annum has been documented.

The biotechnological production of platform chemicals is a somewhat more challenging industrial segment for Norway to undertake. We have a limited national marked, and there is a need for further R&D, subsequent scale up and industrialization of production processes. There is also an additional need for skilled personnel in the field of gene technology. For further value creation based on platform chemicals in Norway, the Grenland area will be important with INEOS and their knowledge in chemical synthesis. In addition, the knowhow and industrial experience found at Borregaard makes this company an interesting partner for chemical production in Norway. Experience from large scale, gas based industrial production of chemicals in Norway could also have positive effects on other local industries basing their production on Norwegian renewable resources such as wood and fish waste. All three industrial segments do have overlapping interests concerning equipments, scale ups, products and marketing.

Several international industrial companies such Evonik, BASF, DuPont, and NatureWorks are active in the field of biological production and use of biological derived platform chemicals. These companies are considered key players in the establishment of value chains in the field of platform chemical’s. If production of chemical intermediates is to be established, key inputs in the form of technology, IP and off taker agreements will be important. Regarding the use of platform chemicals in Norway, and their value chain, more detailed studies are needed.

8 Recommendations

In order to establish gaseous fermentation as a technology for industrial production of nutritional proteins or platform chemicals, it is suggested that the following initiatives are taken:

• Establish R&D projects through funding agencies, focussing on o further Business development/market survey for establishing Norway as a hub

for gaseous fermentation, as a continuation of this report, o Methanotropic bacteria's as a model for establishing synthetic biology as a

field of expertise in Norway. o Attracting industrial players that are active in the field of synthetic biology to

establish production systems that can utilise natural gas as feedstock o Upstream and downstream process control and process optimization

• Support for establishing a demo facility for gaseous fermentation o Process optimization in a realistic setup

www.iris.no

- 21 -

o Design and adaptation of fermenter • Support to business development, strategy development, and commercialisations.

o Business development, network establishment domestically and internationally.

o Market survey

www.iris.no

- 22 -

9 Appendix

Table 1: Selected commercial companies and interests for different fermentation processes based on natural- or synthesis gas. Companies, products and technologies

Company Country Products Carbon source

Status

BioProtein NO Single Cell Protein, Chemicals with Calysta

Natural gas Commercializing

R&D

UNIBIO DK Single cell protein Natural gas Commercializing

Calysta Energy US Chemicals Natural gas R&D, cooperation with BioProtein

Intrexon US Chemicals Natural gas R&D

INVISTA US Chemicals, butandiol Syntheis gas Evaluating with Lanzatech/CPI

Evonik DE Chemicals, SCP Natural gas

Fume gases from steel production

Evaluating with BioProtein

Evaluating with Lanzatech

NatureWorks US Chemicals Natural gas R&D with Calysta

Ineos

UK EtOH Biomass Commercial

www.iris.no

- 23 -

Table 2: Some examples of how M.capsulatus can be used to produce several platform chemicals based on metabolites present in the organism.

Metabolic compound in bacteria

Monomer Type of product

Pyruvate Isoprene

3-hydroxypropionate

Lactic acid

Rubber, Plastics, Jet fuels

Acryllic acid

Plastics

Acetoin 2,3 butandiol Butadiene

Fatty acids Fatty alcohols Detergents

Diesel fuels

2-ketoglutarate Ethylene plastics

Succinate Succinic acid bioplastics