Shell has been a partner of Virent for the past five years, working to develop the Eagle pilot biorefinery that has been operating in Madison for several years. Shell also is an investor in Virent, which spun off from the chemistry labs at the University of Wisconsin-Madison.
Shell said its goal for the new plant is to use a process similar to the sugar-to-biofuels conversion process that Virent's founders developed in the lab and refined at the pilot plant.
Shell, Europe's biggest oil company, said it would explore a variety of feedstocks to produce gasoline, diesel and jet fuel.
Shell has placed a variety of biofuel bets as it conducts research and development into crude oil alternatives. It has invested heavily in ventures that produce ethanol from sugar cane in Brazil. Among the companies it has invested in are Codexis and Iogen.
With this move, Shell stressed it is looking to develop drop-in biofuel.
Drop-in biofuel is fuel that has the same properties as conventional fuel and doesn't require additional blending, storage or engine modifications. Ethanol blends require special ethanol-ready gas tanks as well as engine modifications.
In an article posted on Biofuels Digest on Tuesday, Editor Jim Lane speculated that Shell could make a further announcement about its plans for Virent technology this year or next year.
"Why build a pilot plant in Houston when Virent already has one in Madison? Focus and acceleration," Lane said. "Shell's seen something, and it wants control over the testing timelines and parameters."
In addition, Lane said, Virent isn't focused solely on transportation fuels. Recently, it announced it will work with The Coca-Cola Co. to develop chemicals from plants that can be used to make renewable plastic bottles.
Virent has 117 employees, up from about 20 five years ago. The company has attracted $75 million in private investment as well as grants from several federal agencies.
The company is working on its first commercial-scale plant to produce gasoline and chemicals, scheduled to open in 2015, Virent chief executive Lee Edwards said in testimony before Congress last week.
The plant location has not been selected, but Virent projects it will create 50 permanent jobs and 200 temporary construction jobs.
Edwards testified that Virent's renewable fuels and products have the potential to replace more than 90% of the petroleum-based products that are made from a barrel of crude oil, unlike first generation biofuel, which is blended into gasoline or diesel.
"Technologies like Virent's mean that plentiful, plant-derived sugars have the potential to compete with petroleum as a source of energy," he said.