Velocys cranks up GTL plant capacity as commercial deals loom

Technical improvements at its pilot gas-to-liquids plant have allowed Velocys to increase capacity of liquid hydrocarbon products by more than 50% as it begins to commercialise the technology for a more diverse range of chemical markets.

Velocys, which is nearing commissioning of its first commercial plant in Oklahoma, USA, said pilot plant tests demonstrated "significant" increasing capacity and productivity and improving commercial plant economics.

The tests proved that superior yields of high value liquid hydrocarbon products could be maintained while simultaneously achieving these high levels of productivity.

Potential revenue from a plant would be increased and the impact of oil price volatility reduced, Velocys said, as the process was now shown to produce industry-leading yields of the highest-value, longer-chain hydrocarbons at these high productivity levels, appealing to the specialty chemicals market.

Advances made at the pilot plant, including a new faster start-up protocol, have already been incorporated into the design of its own 4,800-barrel per day Ashtabula GTL plant being developed in Ohio, which is being re-engineered to increase its design output of specialty waxes, lubricants and other niche products to reduce reliance on liquid fuel.

Chief operating officer Paul Schubert said the technology has now been tested for over 24,000 hours at the pilot and demonstration scale and for over 1.3m hours in the laboratory.

"We enter our commercial phase with a technology that has been developed with rigour and thoroughness and in which we, our clients and partners can have every confidence."

A recent note from Numis said that while the market opportunities for GTL were greater in a higher oil price environment, in the current market conditions Velocys was focused on working with potential customers focused on other areas.

These include customers who are looking to harness to economics of GTL where low-cost feedstocks exist (such as biomass, flared gas or landfill gas), isolated markets to fuel domestic energy demands and where opportunities exist to produce high value speciality products, such as waxes and lubricants.

At the time of interim results in October, Canaccord noted that the slide in liquids prices has not been accompanied by an equal slide in gas, meaning the "merchant" model for Velocys's GTL technology was now commercially unviable.

"However, this was never the most important market for the company: other markets remain wide open, in specialty chemicals, in handling stranded gas, and in serving geographies with a need for middle distillates but no local refinery."

The re-engineering of the Ashtabula plant to generate specialty waxes, lubricants and other niche products made the micro-scale GTL "compelling" as the value of these chemicals has largely decoupled from WTI or Brent.

Canaccord also said that one customer - whose plans remain confidential - was targeting a micro-scale GTL plant that could move swiftly to final investment decision, and was equity funded with offtake and supply agreements. "Importantly, we understand this customer is willing to go ahead without waiting for the startup of the (Oklahoma) plant."