Velocys’s interim results show progress in GTL commercialization
Velocys plc released interim results for the six months ended June 30, highlighting the manufacture of the reactors and catalyst is complete for its gas-to-liquids plant, currently under construction adjacent to Waste Management’s East Oak landfill.
In May, the joint venture Envia Energy, between Waste Management Inc., Ventech Engineers, International LLC, NRG Energy Inc. and Velocys, announced that it held a groundbreaking ceremony for its gas-to-liquids (GTL) plant, located adjacent the East Oak Landfill in Oklahoma City. The plant is to produce renewable fuels and chemicals from biogas and natural gas using GTL. “2015 has started with some very real, tangible achievements, culminating in the recent completion of the reactors and catalyst for our commercial reference plant,” said Pierre Jungels CBE and chairman of Velocys.
Jungels said, currently, the key priority for the company is to successfully build and startup Envia Energy’s Oklahoma City plant, scheduled for completion in the first half (H1) of 2016. Velocys and its supply chain partners have now completed the manufacture of the reactors and initial catalyst charge for the plant. All American Society of Mechanical Engineers certifications required for the reactors prior to installation and commissioning of the plant have been issued.
As reported in the company’s financial results for 2014, the plant will provide a commercial reference site for Velocys’ GTL technology and will deploy a number of the company's full-scale Fischer-Tropsch reactors.
Overall, the company reported revenue of £100,000 ($151,000) for the period ended June 30, in comparison to £1.0 million for the first half (H1) of 2014. Cash, cash equivalents and short-term investments of £46.2 million was reported at the end of the period, compared to £59.8 million remaining at the end of 2014. According to Jungels, the revenues for the period reflected the company’s transition to commercial operations and timing of revenues from the Oklahoma City plant, which will arise from H2 onwards.
Besides the reported progress on the Oklahoma City project, water permits were granted, gas suppliers and product off-takers identified and letters of support received from a major lender and potential investors for the Ashtabula project. Velocys highlighted it has a number of opportunities in its sales pipeline, including an opportunity with a major fuels player in the U.S. that could not yet be announced. Velocys commented on a few additional projects already in the public domain. Red Rock Biofuels has made a number of announcements over the course of the year that included securing partner financing from Flagship Ventures and an offtake agreement with FedEx. According to the report, between Southwest Airlines and FedEx, offtake of all the jet fuel that will be produced from the biomass-to-liquids (BTL) plants has been contracted. In addition to positive results yielding from Velocys' pilot plant, during H1 Velocys installed a single core reactor—identical to a full-scale reactor except that it incorporates a single core instead of the standard four—as a permanent resource at its Ohio technical center.
Another highlight in the interim report was the settlement of the intellectual court case with Johnson Matthey, which includes a payment to Velocys post the end of the period. The company also recently appointed a non-executive director Mark Chatterji as chairman of the audit committee, which was also highlighted in the report.
“2015 is a year of delivery for Velocys,” Jungels said. “Velocys continues to lead in the emerging market of smaller scale GTL and to demonstrate the strength of the structural opportunity.”
According to Jungels’ statement in the report, natural gas continues to be an abundant, low-cost and, in many situations, underutilized resource. He believes there are still many opportunities for smaller scale GTL that are likely to retain their value, even with reduced gas-oil differentials at the major hubs. “This is particularly the case for Velocys, whose reactor and catalyst system delivers high conversion and a high yield of valuable products,” he said. “Velocys is strongly positioned during this challenging period. It has a leading technology advantage, a commercial plant committed and under construction, a strong balance sheet, a good pipeline of sales opportunities and one of the largest, most experienced Fischer-Tropsch teams in the industry.”