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Oil from bug poo?

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AMERICANS could one day be filling their tanks with the genetically modified excretions of tiny bugs if one Silicone Valley start-up has its way.

LS9 says it is just one month away from beginning its first trials of the new renewable fuel, created by altering the genes of tiny bugs so that when they feed on agricultural waste such as woodchips or wheat straw, they do something extraordinary. They excrete crude oil.

"Ten years ago I could never have imagined I'd be doing this," says Greg Pal, 33, a former software executive as he holds up a small beaker of bug poo. "It's a brave new world," he grins.

Mr Pal is a senior director of LS9, one of several companies in or near Silicon Valley that have spurned traditional high-tech activities such as software and networking and embarked instead on an extraordinary race to make $140-a-barrel oil from Saudi Arabia obsolete.

What is most remarkable about what they are doing is that instead of trying to re-engineer the global economy - as is required, for example, for the use of hydrogen fuel - they are trying to make a home-grown product that is interchangeable with oil.

This "Oil 2.0" will not only be renewable but also carbon negative - meaning the carbon it emits will be less than that sucked from the atmosphere by the raw materials from which it is made.

His company has already convinced one oil industry veteran of its plan: Bob Walsh, 50, who now serves as the firm's president after a 26-year career at Shell, most recently running 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. It is a bold statement from a man who works in a glorified cubicle in a San Francisco industrial estate for a company that describes itself as being "pre-revenue".

Funded by $US20 million from investors including Vinod Khosla, co-founder of Sun Microsystems, LS9's bugs are single-cell organisms, each a fraction of a billionth the size of an ant.

They start out as industrial yeast or non-pathogenic strains of E. coli, but LS9 modifies them by custom-designing their DNA.

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

Because crude oil is only a few molecular stages removed from the fatty acids normally excreted by yeast or E. coli during fermentation, it does not take much fiddling to get the desired result.

For fermentation to take place you need raw material. Anything will do as long as it can be broken down into sugars, with the by-product ideally burnt to produce electricity to run the plant.

The company is not interested in using corn as feedstock, given the much-publicised problems created by using food crops for fuel, such as the tortilla inflation that recently caused food riots in Mexico City. Instead, different types of agricultural waste will be used according to whatever makes sense for the local climate and economy.

The bugs excrete a substance that is almost pump-ready. "Our plan is to have a demonstration-scale plant operational by 2010," says Mr Pal.