LONDON: TomCo Energy plc has established a joint venture company, Greenfield Energy LLC with Valkor LLC to pursue the development of an oil sands plant.

Valkor has entered into an agreement with Petroteq, which will be transferred to Greenfield, for Valkor to take over the management and operations of Petroteq’s existing oil sands plant at Asphalt Ridge, Utah (POSP), pursuant to which Greenfield will undertake certain upgrades to the POSP and run associated tests to demonstrate the POSP’s commerciality.

John Potter, CEO, commented: “We are delighted that the preliminary results of the Pre-FEED study are favourable, and following completion of the Placing, we can now move forward with our joint venture with Valkor, to seek to demonstrate the commerciality of the Oil Sand Technology.

“We believe there is significant potential upside and look forward to keeping shareholders updated as we move forward with the upgrades to the POSP.”

TomCo received a preliminary draft of the Pre-FEED study from Valkor, which seeks to demonstrate the economic viability of the Oil Sands Technology.  The Board of TomCo believes that the draft Pre-FEED study indicates that the use of the Oil Sands Technology is likely to be economically viable.

The draft Pre-FEED study sets out the design criteria, including the environmental and regulatory compliance and codes and standards required, the product specifications of the feed stock, sales oil and effluent solids, the process systems, the safety systems, the civil and structural requirements and the mechanical, electrical and instrumentation and control requirements, for a commercial scale 10,000 barrels of oil per day (bopd) oil sands plant.

The results of the draft Pre-FEED study have provided the TomCo Board with sufficient comfort to enter into a binding joint venture agreement with Valkor (the “JV Agreement”) to form and regulate the operations of Greenfield, a newly incorporated Utah registered company that will seek to pursue the development of a plant utilising the Oil Sands Technology.

Under the terms of the JV Agreement, the Company will provide funding to Greenfield, subject to being satisfied as to the use of such funds, of up to US$1.5 million, to enable Greenfield to be able to complete, inter alia, the required upgrades to the POSP and to undertake the proposed test programme as detailed below, together with funding TomCo’s contribution to the FEED.

Valkor will provide the engineering knowhow pertaining to the Oil Sands Technology required to complete the changes and will undertake the work detailed in the Work Order.  Valkor will provide the services for the completion of the pre-FEED and the FEED up to a value of US$375,000, along with their management and operating experience and any other information and other valuable resources owned by ‎and/or controlled by Valkor.  In addition, Valkor has granted to Greenfield a licence to the Quadrise MSAR® technology, for the processing of heavy sweet crude into heavy fuel oil for which it has a right to an exclusive licence, for the use on all future plants that are majority owned and operated by Greenfield in Utah.

Pursuant to the Work Order, Valkor has recently entered into an agreement to take over the management and operations of the POSP, for an initial 12 month period, to ensure the proposed upgrade works, as detailed below, can be completed in as short a period as possible.  With the establishment of Greenfield, Valkor will now transfer the Work Order to it.

Pursuant to the Work Order, Greenfield intends to utilise the existing knowhow of Valkor to upgrade the POSP, in order to carry out small scale test operations, so as to assist with the determination of the design of a scaled version of a commercial scale plant.  The most significant upgrade to the POSP will be the addition of the Quadrise MSAR process, which will seek to further process the oil into a premium, heavy fuel oil product for retail sale as IMO 2020 compliant bunker fuel or as No. 6 diesel for heavy machinery.

The aim of the upgrade works is to increase the POSP’s capacity to 500 bopd and to run it for a sufficient period of time for the design to be reviewed and the operations verified by third party engineers.  On completion of this work, it is intended that a FEED will be completed for a commercial scale (up to 10,000 bopd) oil sands plant.

In addition, Valkor has entered into a new lease, effective from 1 July 2020 and for a term of 12 months, with the landlord of the POSP site, which will allow Valkor access to the land to be able to operate the POSP to undertake the necessary upgrades and tests as well as to mine for feedstock for the POSP.  Pursuant to the lease, in addition to a monthly rent, the landlord will be entitled to certain royalty payments in respect of any commercial produce from the POSP and/or associated operations.  Valkor has also granted Greenfield the right to occupy the site to complete the upgrade works and operations of the POSP proposed under the Work Order.

Under the JV Agreement, Valkor has granted a licence, for the use on all future plants that are majority owned and operated by Greenfield in Utah, to its existing Intellectual Property (“IP”) and knowhow to Greenfield of the processing of oil sands into heavy fuel oil.  All modifications and improvements to the IP developed in Greenfield, including in relation to the upgrade of the POSP, will belong to Greenfield, which the Board of TomCo believes will allow Greenfield to develop its own oil sands plant, subject to identifying a suitable location.  Greenfield will seek to identify and secure suitable locations in Utah for a commercial scale (up to 10,000 bopd) oil sands plant.

The POSP and Oil Sands Technology has been in development by Petroteq for a number of years, to determine a clean and environmentally friendly method of producing heavy fuel oil from oil sands.  The system contains several parts: a front end, where ore is crushed and mixed with solvent; a middle section, for the separation of liquids and sand; and a back end to recover the solvent for reuse, produce a saleable bitumen product and return a hydrocarbon-free sand.

In 2018, Petroteq entered into a management services agreement with Valkor, to bring Valkor’s process engineering experience in to help the design process.  The work began with a redesign of the back end to increase reliability and capacity, resulting in a 12 API, ultra-low BS&W, heavy oil product with almost no sulphur.  Further work continued through to the end of 2019, to improve the middle section efficiency for sand and oil separation while reaching steady production at rates as high as 300 bopd.

In order to complete the necessary upgrade to the POSP needed to be able to demonstrate its commerciality, as well add the Quadrise MSAR process, and to be able to run the necessary tests, Valkor has taken over the management and operations of the POSP under the Work Order.  Any IP developed as result of the upgrade and from the tests to be run will be the property of Greenfield.