TIDMQFI
RNS Number : 1622Z
Quadrise Fuels International PLC
16 September 2015
16 September 2015
Quadrise Fuels International plc
("QFI", "Quadrise" or the "Company")
Half Year Update on Major Active Programmes
Quadrise, the emerging supplier of MSAR, a low cost alternative
to heavy fuel oil in the shipping, oil refining and power
generation markets, is pleased to provide the following update on
its principal active programmes.
Highlights
-- Contracts executed with Maersk Line A/S ("Maersk") and
Compania Espanola De Petroleos S.A.U. ("CEPSA") for the Operational
Trial Programme to provide the basis for the issue of Letters of No
Objection ("LONOs") by participating marine engine
manufacturers;
-- Operational Trial to include the supply, installation and
commissioning of a Quadrise MSAR Manufacturing Unit ("MMU") at the
CEPSA San Roque refinery near Gibraltar;
-- Refinery and power generation plant designated for proposed
2016 'production to combustion' pilot programme in Saudi
Arabia;
-- Approval for detailed feasibility assessment for a Refinery
Power and Steam Refuelling project; and
-- Appointment of General Manager - Refining Business
Development completes the senior executive resourcing
programme.
Marine - Contracts signed for the Operational Trial
Programme
Agreements have been executed between Maersk, CEPSA, and the
Company's 100% subsidiary, Quadrise International Limited ("QIL"),
together the "Parties", for inter alia, the supply, installation
and commissioning of an MSAR Manufacturing Unit ("MMU") at the
CEPSA San Roque refinery near Gibraltar ("San Roque") and the
production of Quadrise Marine MSAR fuel to be used in the planned
seaborne operational trial (the "Operational Trial Programme") due
to commence in Q1 2016.
Engine performance data from the associated extended continuous
Operational Trial Programme is required to provide a basis for the
issue of a LONO by the engine manufacturer. The programme will also
provide an opportunity for evaluation of possible further
refinements to on-board fuel handling systems and procedures.
The "Tripartite Agreement" provides for:
- The supply, installation and commissioning of an MMU at the
CEPSA San Roque refinery near Gibraltar adjoining the Algeciras
bunker fuel supply hub;
- The production of Quadrise Marine MSAR fuel, and the terms of
supply to any Maersk vessel participating in the Operational Trial
Programme;
- Contractual terms for the supply of process chemicals,
technical advice and support services by Quadrise to CEPSA for the
period of the Operational Trial Programme; and
- The rights and obligations of all Parties on completion of the Operational Trial Programme.
The Parties have also entered into an agreement for the
envisaged production and future supply of Marine MSAR fuel beyond
the Operational Trial Programme (the "Collaboration Agreement").
CEPSA and Quadrise have further entered into a bilateral agreement
which clarifies the basis on which costs and benefits of MSAR
production will be shared during the Operational Trial programme
(the "Margin Sharing Agreement").
To meet the requirements of the Operational Trial Programme, the
last pre-requisite before the commercial roll-out of Marine MSAR,
the focus is now on finalising detailed engineering design for the
installation and 'tie-ins' of the MMU and ancillary equipment at
CEPSA's San Roque refinery, and for permitting of the plant and
process by the regulatory authorities. This will be followed by
installation and commissioning to enable Marine MSAR production and
supply to participating Maersk vessels as early as possible. Since
these vessels will be operating a regular commercial service, the
MSAR fuel loading will be determined by their operating schedules.
It is anticipated that LONO approvals will require around 4,000
hours of engine operations equating to a trial duration of
approximately 9 to 11 months from MSAR fuel availability.
The process of finalising the Tripartite Agreement and the
Collaboration Agreement, together with the joint assessment of
future commercial activities, identified the need for certain
amendments to the provisions of the Royalty Agreement between QIL
and A.P. Moller-Maersk ("APMM") which was last updated on 20
February 2014. This has led to a number of changes to the terms of
the Royalty Agreement and the execution on 15 September 2015 of a
Novation and Amendment Agreement which assigns the rights of APMM
to Maersk Line (the largest operating company in the APMM group).
The amendments serve to clarify and better define certain
provisions. As was the case previously, the revised Royalty
Agreement provides the legal framework and key terms for future
commercial supplies of Marine MSAR fuel to Maersk and to third
parties when the current programme transitions to longer term
commercial production and fuel supplies. The terms of the Royalty
Agreement are confidential to both parties, and the recent
amendments are not expected to materially affect the commercial
terms for either party. The term of the Royalty Agreement has been
extended from the previous expiry date of 31 December 2022 to the
tenth anniversary of the date of first commercial Marine MSAR
production following the Operational Trial.
Saudi Arabia
The programme as now envisaged involves a pilot/demonstration
project spanning production, transportation and combustion of
Quadrise MSAR fuel within Saudi Arabia.
A substantial coastal refinery has been designated as the MSAR
production site and the fuel will be consumed at a nominated major
thermal power station - where one large 400 MWe generation unit
will be converted from heavy fuel oil to MSAR fuel for an extended
trial period. Quadrise executives and specialists have become
progressively more closely engaged with client technical,
engineering and planning management to develop and finalise the
detailed definition of project requirements and implementation
stages.
The timetable remains broadly as advised in the QFI 2015 Interim
report with production capacity targeted to be installed in late
2015, to ensure fuel availability for an extended combustion
demonstration during H1 2016.
Once all relevant aspects and budgets have been confirmed and
authorised by the respective management teams, it is expected that
the contracts recording the terms on which Quadrise will supply its
technology and services will be executed. Contracts are also
expected to define the project scope and timetable. This will
provide the basis on which orders may then be placed for longer
lead-time plant and component requirements such as MMU's and
service equipment in the near future.
Refinery Power and Steam Re-fuelling
As previously advised, the Company is evaluating selective
opportunities for substituting MSAR for conventional heavy fuels
where used for steam and power generation within refineries. In
certain cases this can also assist with cost effective emissions
compliance as more stringent standards are progressively phased
in.
One such opportunity for a MSAR pilot plant demonstration
(production to combustion) has progressed with a mid-sized refining
company. Written approval has been received for Quadrise to
conduct, with client support, a detailed design feasibility study
in accordance with a defined timetable. The four phases of the
study should be completed by year end 2015, and will include
proposed commercial terms for implementation and future operations.
There are a number of 'fuel users' within the refinery and it is
expected that, following successful demonstration, the use of MSAR
will be progressively extended to fuel all of these requirements.
The client requires that its name be held confidential until the
feasibility report is reviewed and commitment is confirmed on
commercial terms and implementation timing.
Quadrise is looking to identify and progress further similar
opportunities. These projects may be of modest scale individually,
but with attractive economics for both parties and very low cost
logistics, the projects could aggregate to a very worthwhile
additional business sector for the group.
Personnel Appointment
The Company is pleased to advise that Mark Whittle joined the
Quadrise group in July 2015 in a senior executive role, as General
Manager - Refining Business Development. This appointment completes
QFI's near term resourcing programme and ensures that the Company
is fully equipped to meet the demands of our expanding business
programmes.
Mark holds a Chemical Engineering qualification and has
extensive experience in oil refining and related business
activities since 1994, having worked for Esso, Shell and more
recently ConocoPhillips and the Louis Dreyfus Group. Mark has
expert knowledge in the field of refinery configuration,
operations, and process and oil economics.
Commenting on these developments, Ian Williams, Executive
Chairman of QFI, said:
"The Marine programme developments are very encouraging. The
Operational Trial Programme is the final stage before the
commercial roll out of the Marine MSAR product into one of the
world's largest fuel markets. MSAR provides potentially significant
economic and environmental advantages for end users over
conventional heavy fuel oil. The economic case for MSAR remains
solid despite the decrease in oil prices - and the cost of
complying with ever more stringent environmental regulations is at
the forefront of the industry.
The signing of the Tripartite, Collaboration and Margin Sharing
Agreements represents a significant milestone in both the
development of the marine product and for Quadrise as a whole. It
also further vindicates the commitment and contribution made by the
Quadrise team and partners during the product development".
It is reassuring to see closer collaboration on planning for the
KSA project, especially given the scale of the opportunity and
potential benefits for all parties."
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