By Matthew Herper
The energy giant has become the biggest investor in some of the most
out-there genetics research.
Oil companies are better known for burning fossil fuels than splicing
genes. But BP, the energy giant formerly known as British Petroleum, has
made leading-edge technologies like custom engineered bacteria a linchpin of
its strategy to face up to global warming.

In the process, germs would be souped up to make ethanol, biobutanol
or other fuels from plants like corn. Scientists would embed the genomes of
bacteria with genes taken from termites, sheep guts or microbes that live on
your lawn. The very plants they consumed would also be bioengineered, and
even more re-engineered bacteria might produce gasoline or similar fuels
directly.

Still more newly discovered microbes that live in oil or natural gas
wells might increase the efficiency of existing drilling and mining. Our
economy is based on fossil fuels, the remains of long dead organisms. But in
the future we might rely on life forms that have never before existed. BP
(nyse: BP - news - people ) declined to comment directly on its biotech
strategy.

"BP is not doing this because they want to fund basic research," says
Aristides Patrinos, the former director of the Office of Biological and
Environmental Research and now president of biotech startup Synthetic
Genomics. "This revolution in biology is ushering in new tools that, by
revisiting old tricks, can make energy production a lot more effective."

The most prominent bet being made by BP is a plan to spend $500
million over 10 years to fund the Energy Biosciences Institute (EBI), a
proposed laboratory at the University of California, Berkeley. The
neighboring Lawrence Berkeley National Laboratories and the University of
Illinois, Urbana-Champaign are also involved in the project. The project
will look at bioscience approaches from agriculture to economics, and will
also study the ethical implications of all this new biotech work.

But already, before the institute is built or the contract even
signed, the EBI is drawing controversy on the Berkeley campus.

One worry is that the new science of synthetic biology, the souped-up
form of genetic engineering that involves radically modifying organisms or
even someday designing them from scratch, is both more promising and more
dangerous that the technology that has been around for two decades and gave
birth to Amgen, Genencor, and Monsanto. Another concern is that BP will get
significant intellectual property rights to the work being done at Berkeley,
including the right of first refusal to a flood of IP that could result.

But perhaps the biggest red flag is the potential for conflict of
interest, as a small number of researchers look to start up what could be a
big new research field for academics and industry alike.

Chris Somerville, the Stanford plant geneticist who has been tapped to
run the big project, is himself the co-founder of two biotech firms that
will work in the same field as the institute. In one, the plant biotech
startup Mendel Biotechnology, he has a significant interest, he says; he has
less interest in the second, a biofuel startup called LS9.

Somerville has given up any control in either and is in compliance
with Berkeley's conflict of interest policies. But he says he cannot afford
to give up his stakes in the companies; they would be difficult to trade at
a fair value because the firms are not public.

But the connections don't end there. Mendel also has a deal with BP,
as does another biofuels play, Amyris Biotechnologies, which was founded by
Jay Keasling, a Berkeley synthetic biology whiz who initially sought to make
cheaper malaria medicines. (That effort got him a $43 million grant from the
Bill and Melinda Gates Foundation.) But now Amyris is in the biofuels biz.
John G. Melo, the former head of BP's biofuels unit, is its chief executive.

Synthetic biology is such a small field right now that Keasling and
Somerville were both initially involved with LS9, but left, leaving Harvard
researcher George Church as the main scientific founder. Now Church says
that LS9 is making significant progress, engineering E. coli to produce
hydrocarbons. The idea is that bacteria could somehow efficiently make fuels
that resemble gasoline, but with fewer environmental costs.

"These things don't get immediately disentangled," says Church, who
worked in the medical biotech business as a researcher in the early days of
Biogen, now part of Biogen Idec, before coming to Harvard. "In any
meteorically rising field, the number of people is going to be small, and
they're competing against each other at a commercial and academic level."

Another company that has a deal with BP is Synthetic Genomics, which
was founded by human genome pioneer J. Craig Venter. The firm recently made
headlines by showing that the genome of one bacteria species could be
transplanted into a similar one--a step toward making a germ with entirely
man-made genes.

But the company's tie-up with BP focuses on another area: using the
sequencing technologies that Venter has pioneered to examine the microbes
that are found inside natural gas and oil wells. Jonathan Eisen, a
researcher at UC-Davis who is not working on the project, says that although
that might not produce new kinds of fuels, these undiscovered species could
make the discovery of existing fuels more efficient.

Venter says the goal is to discover the "thousands and thousands" of
different organisms found in fossil fuel sites, from coal beds to oil wells.

These environments are super-hot, and exactly what kinds of microbes
live in them is basically unknown. Patrinos helped launch efforts to learn
how to collect living things from such otherworldly environments while he
was at the DOE.

Just because BP is being so public about its research by investing in
biotech firms and academics doesn't mean its rivals aren't quietly making
their own investments. Chevron, for instance, formed a biofuels business
unit last May. One disadvantage to BP's approach is that university
researchers won't keep their work secret, as in-house scientists might.

In the past, biotech has never succeeded in areas like mining or
manufacturing in the same way it did in medicine. Now, with new technologies
that allow scientists to find and alter microbes in ways that were never
before possible, a new generation of biologists is looking to change that.


[www.forbes.com]