Genoil starts Pemex test of unit predicted to save $100bn in bunker costs

Crude-to-low-sulphur-fuel technology could save '$100bn per year' in marine fuel expenses, says CEO.

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Updated on 14 Sep 2018 08:17 GMT

Genoil Inc - a developer of sulphur removal technology which converts heavy or sour crude oil into low-sulphur fuel oil - confirmed on Thursday that it has started testing oil from Mexico's Pemex by passing it through an upgrader to turn heavy oil into light de-sulphured fuel.

The news follows the company's announcement in May that it would be performing a desulphurization test in Russia to test Pemex's heavy crude oil, and that it expected the test results to exceed the recent demonstration tests it performed with China Petroleum Engineering and Construction Company (CPECC), a division of China National Petroleum Corporation (CNPC).

The GHU unit

The proprietary Genoil Hydroconversion Upgrading (GHU) desulphurization process converts heavy or sour crude oil into more valuable, compliant low-sulphur fuel. Genoil says its technology "could save the shipping industry billions of dollars a year in unnecessary bunker fuel costs".

Discussing the upcoming global cap on fuel sulphur content in 2020, Genoil said: "Demand for low sulphur fuel will increase significantly in 2020 when the sulphur content of marine fuel is reduced from the current 3.5% to 0.5%, with shipowners and cargo owners, who pay for the majority of bunker fuel, facing a dilemma[:] switch to distillates or potentially costly blended marine diesel oil (MDO), pay for an onboard scrubber unit at the cost of millions of up front dollars in capital expenditure, or invest in LNG, where the global infrastructure and standards for bunkering are currently very embryonic.

"Genoil's GHU offers a fourth way - enabling the conversion of Heavy Sulphur Fuel Oil (HSFO) and crudes into more valuable low sulphur fuel that will be compliant with new International Maritime Organization (IMO) Annex VI Sulphur rules from 2020."

The GHU unit - which can be built alongside existing refinery infrastructure in major bunkering hubs rather than incurring the expenses to develop new infrastructure - costs between $30m and $80m to install per one million tonnes per year of capacity.

Based on Genoil's predicted crude prices, which are said to have been reviewed by independent bodies, an initial investment of $30m could achieve payback in less than three months with current market spreads.

Effect of demand for lower-sulphur fuel

Canada-based Genoil posits that, as global demand rises for lower-sulphur marine fuel to meet stricter environmental regulations, the bunker fuel price spread is likely to increase.

Genoil also notes that refiners had "finally blinked in their investment standoff with the shipping industry" and that there would be additions and expansions of cracking, coking and deasphalting units in Asia, Europe and South America to meet the change in fuel demand.

The desulphurization specialist suggests that if refiners convert to a marine gasoil (MGO) equivalent, the effect on the world fleet's engines designed for high-sulphur fuel "will be adverse versus Genoil's product, which keeps the heavy oil side but removes the sulphur to make it in compliance".

Price and savings predictions

Genoil forecasts that the cost of MGO will rise to at least double its current price to around $1,400 per tonne as demand increases, while the price of HSFO will drop 80 percent to $87.00 from $421.67.

And after adding Genoil's $48.00 per tonne conversion charge to the HSFO price, this would amount to an overall price per tonne of $135.00.

Commenting on the figures, chairman David Lifschultz said: "Genoil could be 90 percent cheaper than Gasoil at 2020... This will produce a dynamic savings for the shipping industry of $100bn per year."

Lifschultz added: "If we look at just 10,000 mid-sized ships [averaging 35 tonnes per day for 300 days a year] from a world fleet of 58,000 larger international vessels, and assume a conservative non-dynamic price spread of $600 per tonne between HFO and MDO from 2020, Genoil's GHU would save fuel costs of $36.8bn, even with Genoil's charges for the desulphurization process factored in."

Further tests

Genoil says it has plans in place to perform two additional tests: one for an unnamed global assurance group servicing the shipping industry and another for a 'major, national oil company'.