written by reader GENOIL: THE LONG AND THE SHORT OF IT OIL

By Alvin Bojar, March 17, 2017

While there are still voices claiming that global warming is a myth and that the burning of fossil fuels has no effect on the ozone layer, no one disputes the contaminating effect that the discharge of exhaust fuels from ships has on both our oceans and inland waterways. The seriousness of man-made water pollution, especially in the form of high sulfur content in fuel, has been recognized for some time. It was first addressed seriously in 1997 by MARPOL (Marine Pollution), the International Convention for the Prevention of Pollution from Ships, when the maximum sulfur content in bunker fuel was limited to 4.5%.

The inevitability of further reductions was the basis for Genoil’s decision to fund and test its GHU (hydroconversion upgrader) technology. These efforts were rewarded in 2001 by the issuance of patents in the U.S. and Canada. The technology offered a substantial economic advantage for users of heavy or residual oil in that it could lower the sulfur content at a cost far below that of current technology. To conclusively prove the feasibility of its GHU technology, Genoil proceeded to build a $15 million test facility on its 127-acre property in Two Hills, Alberta, Canada.

The first company to test Genoil’s patent was Conoco’s National Centre for Upgrading Technology, which conducted a highly successful three-month study in Kerrobert, Sascatchuan, refining Athbasca bitumen. The next test of significance occurred in June 2008, when China Petroleum Engineering Company issued a Feasibility Study Report of the Genoil Upgrader. One of the study’s goals was to determine the cost of lowering the sulfur level of medium heavy and sour crude to 0.50%, which was of vital importance, as there are 900 billion b/o in recoverable heavy oil reserves worldwide. The results came in at slightly under $3.00 per barrel, or 70% to 77% cheaper than competitive processes, giving Genoil a very significant market advantage over current conventional technology.

This became even more meaningful, when in October of 2008, MARPOL announced the sulfur content of bunker fuel was being lowered to 3.5%, effective immediately, to be followed by a further reduction to 0.5%, starting in January of 2020. As of that date, all ships will be prohibited from burning any fuel oil with sulfur content in excess of that limit.

The most recent testing of the GHU took place in 2010, when Lukoil flew in 100 barrels of crude from its Yarega oil field to Genoil’s upgrading pilot plant in Canada. The results were consistent, substantiating the claims that the GHU upgrader could desulfurize heavy crude/residual (bunker oil) by a factor of more than 99.5% at a savings of over 60% compared with current technologies. Due to other factors, Lukoil decided not to proceed with the building of a full scale GHU system at that time. However, more recently they have requested a new GHU presentation.

The excitement generated by the GHU technology and the cost benefits it offers can be better understood with a look at the numbers. According to MARPOL, total global consumption of maritime fuels in 2014 included 224 million tons of marine heavy fuel oil (HFO) with a 3.5% max sulfur content and 64 million tons of middle distillate oil (MGO), which has a sulfur content of less than 0.15%. By 2020, Global demand for fuel with sulfur content not to exceed 0.50% is projected at 272 million tons, of which HFO will constitute 233 million tons, with the remainder comprised of much more expensive MGO, which will be needed to meet ECA (Emission Control Areas) standards of 0.1%. ECA regs are much more strict, as they apply to ports and inland waterways, including the 37,000 km extending through 20 countries of the EU and the even larger waterways of China and Russia.

It takes about 6.7+ barrels to equal a ton of heavy or bunker oil. With an expected demand of 233 million tons in 2020, it will require a minimum of 1,500,000,000 barrels of desulfurized heavy and residual oil to meet this projected marine demand, which is expected to increase in the years going forward. There seems to be no disagreement over industry’s ability to meet this requirement. The issue comes down to one of cost, and that is the wick what will ignite Genoil’s flame.

The price of building a GHU unit capable of lowering the sulfur content of 100,000 barrels of heavy or bunker fuel daily to meet the fast approaching 0.5% regs is approximately $700,000,000. As GHU can refine a barrel of bunker oil to meet the 0.5% standard at a cost of less than $3.00, the expense of constructing a 100,000 b/d refinery can be repaid within a remarkably short three-year timeframe. This may be difficult to believe, so let’s look deeper into the numbers.

As of March 1, 2017, the average cost of 380 CST bunker fuel was around $290/ton, while the price of middle distillate, or light oil (MGO) oil was about $489/ton. As just mentioned, the GHU process reduces the sulfur content of CST 380 bunker fuel to the required 0.5% sulfur content at a cost of $3.00/barrel. As there are about 6.7 barrels in a ton, the cost (6.7 x $3) of refining bunker fuel to meet the new 0.5% sul