Two of Craig Venter’s recent passions have been combing the Earth for microbes and other minute critters that reveal the diversity of life, and creating and redesigning life itself through synthetic biology.

Never thinking small, Venter also has not been shy about blending research and commerce in his quest to finance and further his projects. In the 1990s he created Celera Genomics with over $1 billion in financing to compete with the public project to sequence the human genome.

There comes a point, he once told me, when projects need the king-size resources available in the private sector to scale up and implement. In this case, the goal is to produce a viable alternative fuel to petroleum and–just possibly, he insists–to reduce the fresh carbon spewed in the air when petroleum is burned.

Last week, ExxonMobil announced a commitment to invest $300 million over five to six years in Synthetic Genomics, which Venter founded and now leads as CEO, and to spend an additional $300 million on a complementary internal algae program.

The push is to take advantage of algae’s ability to efficiently transform sunlight into lipids that can be relatively easily converted into diesel, gasoline, and possibly even advanced hydrocarbons used to manufacture plastics, chemicals, and other products.

By the barrel, algae fuel provides three to four units of energy for every unit used to make it–a ratio that approaches petroleum’s 5-to-1 level of efficiency. The ratio for making ethanol from corn is a mere 1.2 to 1, according to some studies. Even making ethanol from cellulosic plants like switchgrass, researchers can achieve only a 2.5 to 1 ratio.

Venter’s company has been developing strains of bioengineered algae that ramp up the output of lipids and can in some cases produce hydrocarbons directly. However, Venter and Emil Jacobs, senior vice president for R&D at ExxonMobil Research and Engineering, both emphasize that their companies will collaborate to investigate any viable option to push algae into the big time of energy sources.

Since research in algae fuels began in the 1970s at the Department of Energy–as part of President Jimmy Carter’s efforts to develop alternative fuels after the oil shocks of that era–several methods have emerged.

First is an open-pond system that grows algae out in the sun. Another is a closed, sunless system that feeds carbon from feed stock such as sugarcane to algae plants in fermentation tanks. A third type is a closed-system bioreactor that uses sunlight.

Synthetic Genomics has favored processes that use sunlight. They also tend toward bioengineered plants, but they will experiment as well with naturally occurring algae that optimize output and other parameters. Researchers have searched all over the planet for candidate species, said Jacobs.

So far, converting algae to fuel has been tried only on a small scale, and whatever process is used will require building massive new infrastructure for water management, feedstock supplies, nutrients, cultivation, and transportation, even if algae oil can be refined at existing facilities.

Algae can be grown on land unsuitable for food crops, but no one yet knows how to optimally produce the vast quantities of algae necessary to supply even a small fraction of the world’s appetite for fuel. A study in 2004 at the University of New Hampshire concluded that 30 million acres–a space the size of South Carolina–would be required to grow enough algae to satisfy U.S. transportation needs.

ExxonMobil’s investment comes after a mini-boomlet last year of investment in algae as oil prices skyrocketed. Other oil companies such as Chevron, Royal Dutch Shell, and BP have invested in algae. Last year, Bill Gates’s Cascade Investment fund invested a reported $50 million in Sapphire Energy, based in San Diego.

The investments slowed down considerably after oil prices fell, though the current collaboration suggests that more investments will be coming. The Department of Energy has just announced that it will invest $85 million in stimulus money on “advanced” biofuels that can be derived from algae and other feedstocks.

If successful, the collaboration between Venter’s company and ExxonMobil could mean an investment of billions of dollars, said Jacobs–numbers Craig Venter hasn’t seen in a commercial enterprise since the headiest days of Celera back in the late 1990s.

That venture produced exceptional science, but was less successful as a business. Time will tell if this latest high-risk gambit into a new and promising, but untried, technology will create a revolution in business and science or turn out to be just so much pond scum.