“Oil Vacuum: Key to Unlocking 800 Billion Barrels?”

By Travis Johnson, Stock Gumshoe, April 8, 2008

Many of you have emailed me about this one, and a few have ventured solutions in email or in the forums or comments on previous articles (most of you are right, of course). This is a teaser from Agora’s Energy and Scarcity Investor edited by Byron King, which I don’t think I’ve looked at before (though many have commented on their previous teaser, for the “China Lake” geothermal investments). The newsletter is one of the pricier ones I’ve looked at lately, $995 (which is the “lowest price ever offered” and a price that will “expire soon,” of course).

And the primary teaser here is for this “oil vacuum” technology, and the company that owns it. So let’s take a look …

Apparently, this technology is owned by a small company, with a stock price under $3, and, in their words …

“… the U.S. Department of Energy says the only company that has it could be key to unlocking an 800 billion barrel oil deposit in the Rocky Mountains.”

The ad says they’ll be producing oil with this technology by the end of next month, and it also says that they have a signed contract to produce from an oil field in Canada as soon as this coming Autumn, so there is some near-term catalyst here, perhaps, for the shares. What else are we told about them?

The technology is touted here as a way to extract oil from the challenging shale beds in the Rocky Mountains area, which is where the “3X the reserves of Saudi Arabia” bit comes in. But it also apparently can make oil in other ways, including from junk.

“That’s right. The “Oil Vacuum” can squeeze oil from landfill trash — using just pennies of electricity to make $5 of fuel and other products.

“Time named the “Oil Vacuum” one of its Best Inventions of 2007 — based on just this one capability.”

And they chime in with a quote from Popular Science, too:

“It sounds too good to be true; a machine that takes in trash and spits out oil and natural gas. But that’s exactly what [the Oil Vacuum] can do.”

Oil from trash? I’m sure there’s a catch in here somewhere, but that certainly sounds compelling, no?

Which is why, I suppose, the “conservative estimate” of returns from this company are 1,310%. Does the fact that they say it’s conservative make it likely? Well, that’s your call … let’s find a little more information to help you decide.

The copywriter here actually did a good job of explaining what the “oil vacuum” is and how it works — it’s based on microwave technology, which makes intuitive sense if we consider that adding heat to liquefy petroleum out of tar is a major way that challenging oil fields like the tar sands have been attacked in recent years.

Here’s an excerpt of that explanation:

“Here’s the thing: Microwaves are like radio waves. They operate across a wide spectrum of frequencies — more than 10 million. Your kitchen microwave operates within a very narrow spectrum of those frequencies to heat up a cold cup of coffee.

“Find just the right frequency among those 10 million, and you can heat up just about anything under the sun.

“Including things made of oil that have outlived their usefulness. They can actually be turned back into oil!

“That’s what dawned on a scientist in New Jersey one day in 1996 as he turned on the local news. He saw a giant tire fire at an illegal dump, belching acrid smoke for miles around.

“What if, he wondered, instead of loading up our landfills with old tires, you could blast a tire with just the right microwave frequency to break it down into the materials it’s made of — including oil?

“This was the beginning of the ‘Oil Vacuum.'”

Nice and clear, right? Makes you wonder why you didn’t come up with this invention yourself?

There’s more — this is apparently a working machine, at least the “trash to oil” microwave/vacuum (they had to put it in a vacuum to keep oxygen from getting in and making the metal trash, and the metal in the tires, explode).

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So I guess that’s a crafty play on words to get our attention, too — how many of you pictured a giant vacuum cleaner that could suck the oil out of the ground? Come on, raise your hand — there’s no shame here! A vacuum sucking goodies out of the earth sounds more fun than a complicated machine that can only operate in a vacuum, huh? Dang.

More on the inventor’s progress:

“After some additional refinements, he perfected a machine about the size of a phone booth that in minutes can transform a 14-inch tire into…

“1.2 gallons of diesel fuel
50 cubic feet of combustible gas
7.5 pounds of carbon black (useful for making everything from ink to athletic gear)
2 pounds of high-strength steel.”

“And it’s not just the tires from a junked car that the “Oil Vacuum” can transform into oil.

“There are metal, plastics, rubber, foam… adding up to about 10% of the car’s weight… all of which can be run through the ‘Oil Vacuum’ and transformed into 80% combustible gases — and 20% oil. With no emissions. And no pollution. The amount of waste that goes to a landfill is cut by 65%.”

So, apparently this uses just electricity, and the teaser says that it uses 50 cents of electricity to generate $5 of oil and natural gas and other good stuff, even as it cuts down on the amount of junk that has to be tossed into the landfill.

This part of the business appears to be first in line for the “oil vacuum folks” …

“In fact, an auto recycler in New York State will be using it onsite no later than May 31. And a California firm will build a brand-new tire recycling plant in Arizona this year, built exclusively around the “Oil Vacuum.” It’ll process 60,000 pounds of tires every day.”

OK, OK, so enough excerpts from the ad.

The other use of this microwave “oil vacuum” technology is in recovering otherwise unrecoverable reserves — the 70% or so (depending on who’s estimating) of the oil in most basins that can’t be recovered using current conventional drilling. Apparently they drop the microwave thingy down the well shaft, heat up the stuff, and it comes out liquefied and partially refined (so this is another teaser about getting a head start on refining, too, not unlike the “underground refinery” that we looked at a little while ago).

And the third use is for shale oil — we’ve looked at a number of shale oil teasers in the past, and there are many more, but the big thing with shale oil is that the successful extraction techniques almost all involve heating up the shale to scare out the good petrocarbons in liquid form, then pumping that stuff to the surface (this is a simplification, of course, but your Gumshoe is a simple man). So, the theory goes, if they have to heat it up, why not a microwave instead of the super expensive stuff that Shell, among others, has been working on developing (and which involves using lots of natural gas, not completely unlike the SAGD process for oil sands recovery). One of Shell’s problems that they had was that you have to not only heat the shale, but also supercool the shale in surrounding areas to create a barrier so that you don’t just heat up the shale oil and then watch it drain deeper into the earth (again, this is the simpleton’s take). Could this “microwave oil vacuum” possibly solve that problem or otherwise make the extraction feasible?

The market cap of the company is, as of the time the email was put together, about $62 million. That’s certainly a teensy, weensy company.

And the Thinkolator happily spits out an answer when asked, “what’s the company?”

This is: Global Resource Corp (GBRC, trades over the counter on the pink sheets)

The shares are up about 20% today so far, thanks no doubt to this relentless advertising campaign — and, I assume the new, eager-to-buy subscribers that the newsletter has no doubt picked up as a result. They ran up to over $5 last fall, but are currently at about $2.40 (the $2-3 range is where they’ve been for most of the last six months).

So … that future promise? The ad said that “it’s just a matter of time before the “Oil Vacuum” is licensed … maybe even [to] one of the “Big Three” in the oil services field … there’s no telling how high this company’s stock will go once that happens.”

You know, in writing about these teasers for over a year now I expect that the absolutely most common phrase in these promises is “it’s just a matter of time,” since nearly every single promise made about one of these companies is couched in the fact that it will succeed over the long run, ev