Following my comments on UEC and Genoil on May 22nd, I was surprised at the level of interest expressed by Gumshoe followers, and others, who I expect will soon be new Gumshoe Irregulars. It seems that my short discussion on oil has spawned a plethora of questions regarding Genoil, which I will attempt to answer in this communication with Gumshoe subscribers.
By far, the bulk of the world’s commercial traffic is carried by ship. And ships are powered by fuel oil, which refers to the heaviest commercial fuel obtained from refining crude. It’s normally called Bunker oil, though the US Navy calls it residual fuel. Basically it’s a Class 5/6 fuel oil, is of high viscosity, and it has to be pre-heated before use. It’s the stuff left at the bottom of the barrel after the more volatile crude is removed. Bunker oil is the cheapest and dirtiest fuel on the planet, and the globe’s predominant source of sulfur dioxide and nitrous oxide emissions. The ECA (North American Emission Control Area) states the sulfur content of a large ship’s bunker fuel runs as high as 27,000 ppm. Compare this with the diesel of a large truck, which registers only 15ppm.
The sulfur content of bunker fuel is 3.5% to 4.5%. Just to give a brief, but meaningful indication of what this means, the EPA states cleaner (0.5% S) marine fuels will result in 14,000 fewer premature deaths by 2020 and 31,000 by 2030 – and this just for US territorial waters. Accordingly, the ECA mandates all ships coming within 200 miles of the coast of North America today must burn bunker oil with a maximum1% sulfur content, to be further reduced to 0.1% by 2015. It’s claimed this will result in an 80% reduction of smog producing oxides of nitrogen within two years.
Similarly, the EU and California already limit sulfur content of ships in port to 0.1%, whereas outside the ECA’s territorial zone, they can revert to cheaper bunker fuel with its higher 3.5% sulfur content. While most shipping lines will burn high sulfur content heavy oil on the open ocean, the maximum permitted in most of the designated areas around the globe is currently 1.0%, scheduled for a further reduction to 0.1% by 2015.
The danger to human health that this type pollution spews forth is well acknowledged in all industrialized and developing countries, from China to the EU, Russia and North America. The dilemma facing shipping lines is how to reduce low priced fuel oil’s high sulfur content cheaply. The main procedure in use today is heating, which can cost as much as $30/barrel. Here’s the dichotomy. Shipping lines must burn bunker in order to remain profitable and be economically competitive. However, the current cost of reducing the sulfur content in bunker fuel is simply prohibitive. It’s economic to do so with diesel, but not with fuel oil. It’s not for lack of trying. Every viable technology is being examined, but the only one that seems feasible and to hold promise is the Genoil Hydroconversion Upgrader.
This process is based on a fixed bed reactor, which simplistically put is a mixing device and method for introducing hydrogen into a fixed bed reactor. Basically it’s a process for treating crude using hydrogen in a special unit, which is a reactor that through high temperatures and high pressures breaks down the hydrocarbon molecule and adds hydrogen to the molecule. They call it the GHU.
I don’t pretend to understand the petroleum chemistry involved, but both the United States and Canadian patent offices were suitably impressed, and have issued patents to the company on its technology. Additional US patents were issued under Method and apparatus for introducing fluids into a hydrocracking reactor. It’s one of three US patents the company has received. This led me to the next question. Has this technology been verifiably tested, or was it still in the theoretical stage. I’ve invested in far too many new technologies that showed infinite promise and negligible performance.
Here, I was surprised again to learn that the first tests in support of the Upgrader’s capabilities were conducted back in 2001, and the company has demonstrated its technical prowess in this regard almost a dozen times since.
But what excited me the most was being told the cost of lowering the sulfur content from 3.5% to 0.5% and even to 0.1% was only $5/barrel. It was the petroleum giant ARAMCO that opined GHU’s capability of saturating the carbon molecule more efficiently caused an increase of all other reactions in the fixed bed reactor, resulting in a process almost 75% cheaper than current methods. It’s hard to compete with a conventional $30 price tag when your competitor has shown it can achieve the same result for around $5.
In essence, what we’re talking about is a mixing device and method for introducing hydrogen into a fixed bed reactor. It was this aspect of Genoil’s technology that convinced Technip Stone & Webster, after a careful study, to enter into an arrangement under which Technip will warrant the company’s technology and do Genoil’s EPC work. Altho I don’t quite understand the ramifications of all this, Genoil informs me it knows of no other company to which Technip has offered this service. This was impressive, but I didn’t realize how impressive, until I looked deeper into Technip. They have 40,000 employees in 48 countries and operate 26 (soon to be 35) vessels. They reported an operating income of $1.15 billion on revenues of $12.6 billion in 2013, and have a current backlog of $21 billion. They have listed their prime onshore activities as (a) Clean Fuels (b) Heavy oil upgrades, and (c) Hydrogen, all of which are in the purview of the GHU.
Technip believes that the GHU can clean up high sulfur crude oil at a savings of 40% and have affirmed their willingness to support Genoil’s technology.
The last element of any doubt I may have had was eliminated when O.W. Bunker, out of Denmark, the largest bunker fuel operator in the world, signed an MOU with Genoil, which it followed by filing a request with the Port of Amsterdam for more land to accommodate the building of a 20,000 BPD capacity GHU facility.
O.W. Bunker sells 380,000 barrels of fuel oil per day, operates 30 ships (container, bulk, passenger) and has a presence in 130 countries.
I almost forgot to mention Genoil Emirates, the joint venture the company has entered into with Sheikh Sultan bin Khalifa, the eldest son of the ruler of Abu Dhabi, and its 2.5+ million barrels per day of oil production. I don’t know what is going on there, but it certainly looks like somebody knows something I don’t know.
When I read all my notes over again, sitting dispassionately at night in my study, I find it difficult to understand how Genoil stock could possibly be selling for a price of $0.07 per share. Understandably, it’s had a disappointing price drop, because shareholder enthusiasm peaked too early. However, all the elements seem to be finally in place for a credible shot at huge potential gains. As a project of this magnitude always takes longer than expected, and may be subject to trader machinations, I’m reminded of what Bernard Baruch used to say, that these were precisely the opportunities he searched for and from which he made his fortune.
I see no comparison between the potential for Genoil compared with that of UEC and other uranium suppliers for nuclear plants, which are about to get a run for their money from cheap and endless natural gas supplies.
To me, the severity of any meaningful losses are minimal, considering what is going on, and if you have the patience to sit for a few years to watch this scenario play out, it might be the most profitable investment of your or my career. At least, that’s what I’m counting on.
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