Paul Allen’s fund backs natural gas to chemicals tech

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Cheap, abundant, natural gas in the U.S. is remaking the American energy landscape. Can turning it into chemicals make one startup – and its new investors, which include Microsoft co-founder Paul Allen – filthy rich? Siluria Technologies, a three-year-old startup that turns natural gas into a building block that can be used to form chemicals, announced on Wednesday night that it has raised a new round of $30 million from Allen’s firm Vulcan Capital, Russian investors Bright Capital, and others.

Siluria, which uses technology from MIT scientist Angela Belcher, will use the funds to commercialize its technology. Currently the company is in the research and development phase, and plans to build its first demonstration plant to produce chemicals from natural gas at scale in 2013. The Siluria has now raised $63 million from a list of investors that also includes Kleiner Perkins, Alloy Ventures, ARCH Venture Partners, Altitude Life Sciences Ventures, Lux Capital and Presidio Ventures (part of Sumitomo Corp.).

The potential of the company’s technology is that it can use natural gas to replace oil in the creation of things like chemicals, plastics and fuels. Oil is being used to produce everything from the plastic of your water bottle, to the paint on your walls.

The Siluria founders used biotechnology to create catalysts that can convert methane, the main ingredient in natural gas, into ethylene. The company will use more traditional techniques found in the petrochemical industry to manufacturer and scale up the production process of ethylene.

So why use natural gas for this when oil has been used for decades? First off, price. Siluria says that natural gas is more than four to five times less expensive than oil in the U.S. and almost half the price in Europe. Second, natural gas is abundant in places like the U.S. and Russia, so if the oil supply becomes constrained then Siluria’s process could be even more valuable.

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