Perfume additives and shark liver oil substitutes first; the broader market for diesel over time.

That’s the revised business plan, in a nutshell, for Amyris Inc., which has formally moved into commercial production. Amyris has created a genetically modified yeast that converts sugar cane syrup into hydrocarbons via fermentation. (Ordinarily, yeast would convert sugar into alcohol, a chemical with less value.)

The company now has two fermenters with a 100,000-liter capacity in operation that are capable of producing 17 million liters a year of Biofene, Amyris’ base hydrocarbon, says Jeri Hilleman, CFO. Amyris -- one of the first companies to champion exploiting GMOs to produce industrial chemicals and fuels -- has sold some Biofene, but not in volume. Most of its revenue comes from reselling fuel from other parties.

Amyris can sell Biofene itself, or add molecules to it to convert it to diesel or designer lubricants and then sell those higher-value products. A substantial portion of the early Biofene production will go to make squalane, a perfume additive. Now, squalane is usually made from heavy olive oil, which can be tough to find because of the demand for extra virgin olive oil, or shark liver oil.

Squalane can sell for $25 to $30 a liter, compared to $5 to $9 a liter for lubricants.

In 2012, Amryis will expand production by installing fermenters with a 600,000-liter capacity. It will also devise new families of hydrocarbons. Biofene contains 15 carbon molecules. In the future, Amyris will try to make 10-carbon molecules for, potentially, the jet fuel and polymer market, as well as 5-carbon molecules, like isoprene, for making rubber. (Genencor, now part of DuPont, showed us a bug-inspired isoprene Goodrich puts into tires.)

The company is also tweaking the process so it can move from batch to continuous manufacturing. “It is like a salad dressing. You pull oil off of the top” of the fermenter tank, she said.

The activity underscores what one could call the rebirth of biofuels. Biofuel and biochem companies raked in hundreds of millions of dollars in 2006 and 2007. Then the recession hit, causing funding and oil prices to collapse.  Companies such as Range Fuels, Imperium Renewables and Mascoma suddenly found themselves facing reduced circumstances. 'Hey, buddy, can you spare $256 million?' became a common refrain.

Amyris wasn't immune from hubris and disappointment. CEO John Melo told us in 2008 that by 2010 Amyris hoped to be producing 200 million gallons of diesel a year and selling it for $2 a gallon at wholesale.

Whoops.

Cut to 2010. Fuel prices started to climb, governments got serious about mileage and biofuel standards, and funding returned, giving startups a chance to meet downward-revised goals. Amyris and Gevo held successful IPOs and Solazyme and Kior are expected soon to follow.

Amyris' progress over the next several years -- assuming it happens -- could also become an endorsement for synthetic biology. Many believe that chemistry and refining can be made cheaper by exploiting engineered microbes and the magic of metabolism.  Others say traditional thermochemical processes work better, particularly for volume manufacturing. If Amyris'  yeast turn out to be the diligent employees the company has promised, expect to see momentum to start to shift to the bugs. 

Fuel is still part of the business plan, she added, but Amyris will move gradually into it. The company largely wants to stick to markets that will allow it to sell its liquids as a positive margin. It’s still not as cheap to ferment oil as it is to extract it out of Saudi Arabia. In some markets with strict renewable standards such as Brazil, Amyris can already find willing fuel customers. A Sao Paolo bus agency is currently buying fuel, for instance.

Over time, Amyris and partners like Shell and Total will try to bring microbe fuel to Europe.

And contrary to some rumors, Amyris remains in the medical market. Sanof-Aventis, the French pharma giant, still plans on coming out with the synthetic version of Artemisinin, a malarial, in late 2011 or early 2012.  

Tags: additives, amyris, biofuels, cafe standards, diesel, fossil fuels, genencor, gevo, kior, perfumes, rubber, Solazyme, solazyme