Velocys enters strategic deal with Koch Project Solutions

Sustainable fuel technology company Velocys announced the execution of a strategic framework agreement with Koch Project Solutions (KPS), a subsidiary of Koch Engineered Solutions, for its Bayou Fuels biorefinery project in the US state of Mississippi on Wednesday.

The AIM-traded firm said that, subject to the completion of due diligence and integrated licensor work, KPS could be awarded a turnkey engineering, procurement and construction (EPC) contract to deliver the project facility, including an integrated performance guarantee wrap backed by a parent company guarantee.

It said the project was expected to produce about 33 million US gallons, or 125 million litres, of sustainable aviation fuel (SAF) per year, with negative carbon intensity, and naphtha made from woody biomass from the pine plantations in the counties surrounding Natchez in Mississippi.

On successful execution of an EPC contract, KPS would be responsible for constructing and commissioning this “first-of-its-kind” facility, which would include the use of renewable power with carbon capture and storage of the plant's by-product, carbon dioxide.

The conversion process from the gasification of wood chips to FT synthesis would generate a “significant volume” of biogenic carbon dioxide as a byproduct.

That carbon dioxide was described by Velocys as “clean, of high concentration and dry”, and could be used for commercial purposes, replacing fossil-based carbon dioxide, or permanently sequestered.

The fuels produced from the facility would meet all requirements and regulations to be sold in the United States, and generate federal and state government credits under RFS-2 and the relevant state low carbon fuel standards.

Velocys said it still retained Worley as its engineering partner for the development of pre-feasibility, feasibility and fully-integrated technology packages for all of its projects, including the planned front-end engineering and design (FEED) phase for the Bayou Fuels project.

“The framework agreement with KPS is an important step in the progress of staged development of the Bayou Fuels biorefinery in Mississippi, which will support a financing package for the FEED phase of the project,” said chief executive officer Henrik Wareborn.

“We selected KPS due to their expertise in strategically evaluating and managing complex projects, particularly in the energy infrastructure space.

“The project will deliver SAF with a carbon intensity of -144g carbon dioxide equivalent per megajoule through the combination of biogenic feedstock, renewable power and carbon capture and storage.”

Wareborn said such fuels “significantly” contribute to improved air quality by reducing particulate emissions by up to 90%, as well as lower nitrogen oxides and 99% lower sulphur emissions compared to fossil fuels and standard aviation fuel.

“The US is gathering considerable momentum backed by much needed SAF policy support, as seen with the recently announced 'Sustainable Skies Act', which will establish the SAF blenders tax credit.

“Velocys is well positioned to deliver the Bayou Fuels project with an integrated technology to drive down the carbon intensity of its aviation industry clients.”

At 1401 BST, shares in Velocys were down 1.64% at 5.4p.