KiOR Lands Chevron JV as Biocrude Buyer

UPDATED: KiOR, the biofuel startup that’s planning a $100 million IPO this year and seeking a $1 billion federal loan guarantee, has just landed a second sizable potential customer. Catchlight Energy, a 50-50 joint venture between subsidiaries of oil giant Chevron (s CVX) and forest products giant Weyerhaeuser (s WY), agreed Tuesday to a “conditional off take agreement” to buy KiOR’s biocrude-based gasoline and diesel blendstocks crude oil substitute from its first plant, set to open in 2012.

Pasadena, Texas-based KiOR has a long way to go between today’s announcement and actually producing and selling its biocrude. But signing up potential customers will be important for the startup as it seeks to prove to would-be investors and Department of Energy loan application officers that it can deliver on its promises.

UPDATE: KiOR’s first conditional customer, Hunt Refining Co., plans to integrate KiOR’s biomass-based crude oil substitute biofuel products into its existing oil refining processes. Catchlight, on the other hand, was formed in 2008 to become a “major integrated producer of biofuels,” doubtless looking to turn Weyerhauser’s forestry byproducts into marketable biofuel via Chevron’s refining and fuel distribution expertise.

KiOR’s biocrude could fit into Catchlight’s plans in a different way than most biofuels like ethanol and biodiesel, which are not made to be put directly into vehicle gas tanks. The large majority of today’s ethanol and biodiesel are made from food crops — corn and sugarcane for ethanol or soy and palm oil for biodiesel. Next-generation biofuels made from non-food sources like wood chips, straw, grass, or other bio-based waste products, have so far struggled to move into commercialization at prices that can compete with petroleum-based fuels.

KiOR is hoping to circumvent that problem by turning biomass like wood chips into a substance identical to crude oil, using a catalyst designed to help the oil industry clean up super-heavy crude by superheating it in the absence of oxygen. That process, known as pyrolysis, is pretty widely used in industries like chemical manufacturing, compared to the harder-to-handle, genetically modified bacteria, yeasts or algae strains that underlie many of today’s next-generation biofuel efforts.

KiOR needs to raise a lot more money than the estimated $41.5 million in venture investment it has raised to date, and a proposed $75 million Mississippi state grant will only get it partway toward its goals. That’s why it’s looking to go public and is asking for an unprecedentedly large $1 billion DOE loan guarantee — $1 billion being about the amount it says it will need to build five plants throughout the U.S. Southwest.

So far this year, we’ve seen several biofuel companies go public with some success. Biocatalyst developer Codexis (s CDXS) is working with oil giant Shell’s $12 billion sugarcane-to-biofuel operations in Brazil, and genetic engineering company Amyris (s AMRS) just opened its first industrial-scale plant for turning sugar into the industrial chemical farnesene last month, though it’s not planning full-scale biofuel production until 2012.

As for this year, biomass-to-biobutanol retrofitter Gevo (s GEVO) went public earlier this year, and algae-to-biofuel startup Solazyme is planning a $100 million IPO later this year as well.

Image courtesy of Sarah Cady via Creative Commons license.