Can new funding finally lift Quadrise’s MSAR into the fuel mix?

Paul Gunton

Paul Gunton · 06 September 2019

ShipInsight


My recent report about Waterfront Shipping’s newest methanol-fuelled tankers mentioned that it and its sister ship will be upgraded with equipment to make it possible to add water to the methanol, which will make it NOx Tier III-compliant without needing to use SCR or an EGR. I later provided additional information about the implications of that for its engine.

Water in fuel is not a new idea, but methanol is soluble in water so there is no risk of the two fluids separating. For other oil/water blends, that can be a problem but AP Møller Maersk conducted trials in 2016-17 using ‘Multiphase Superfine Atomized Residue’ (MSAR) fuel, developed by the UK company Quadrise. It is an oil-in-water emulsion – in which the water is the continuous phase – which is said to be more stable that water-in-oil emulsions.

At that time, Quadrise was hoping to secure ‘letters of no objection’ (LONOs) from engine manufacturers on the back of the Maersk trials but those came to an early end when the ship involved had to be drydocked after an accident and was then moved to a different route.

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Quadrise has also had some financial hurdles to overcome since then but, on 23 August, it “secured further funding of £2M (US$2.4) from the first tranche of a £4M facility from Bergen Investments,” its executive chairman Mike Kirk told me this week (4 September). In addition, an open offer of up to £1.5M will be launched “to enable shareholders to provide funding for the business” which will secure funding to the end of June 2020.

But what of its technology? It now has an interim LONO from Wärtsilä, Mr Kirk said, and “we’ve continued to have discussions with major operators and OEMs.” He believes the fuel is well-placed to benefit from the sulphur cap “on the basis that the market is generally seeing that non-compliant fuels and scrubbers is the lowest-cost solution for compliance.”

He also believes that fossil fuels will play a big role in providing energy for many years, despite targets being set – such as IMO’s Initial Strategy on GHG emissions – to reduce carbon emissions significantly. Population growth will increase energy demand and even if renewable energy resources increase at twice the rate they have in the past, by 2050 “you will still end up with a huge gap between [energy demand and] what renewables can deliver.”

To plug that gap, “we think there is still a significant amount that can be done to improve the efficiency and effectiveness of fossil fuels and that’s where we come in,” he said.

For refiners, he believes that Quadrise’s blending equipment serves as “a very low-cost and rapidly-implemented upgrading technology.” Conventional HFO is produced by blending refinery residue with some distillates but then it is sold at less than the original crude cost, he said. Instead, “we dilute it down with water and less than 1% of additives, which frees up all of the distillates” that can be sold for a profit.

ShipInsight readers familiar with Orimulsion will recognise the technique, which is not a coincidence: members of Quadrise’s management team were involved in its commercialisation. Orimulsion is made by blending water with bitumen from the Orinoco Basin but its use has waned over the past decade. Quadrise’s technology is similar, but can use a wide variety of oil refining residues instead of bitumen, Mr Kirk said.

MSAR is cheaper than conventional fuel when compared on an energy-content basis, he said. About 30% of the fuel consists of water so about 1.5 times as much MSAR is needed than HFO yet “we’ll supply you with 1.5 tonnes of MSAR at a discount to what you were paying for the one ton of HFO,” he said.

At the moment, however, Quadrise cannot supply any MSAR. During the Maersk trials, blending equipment was set up in the CEPSA San Rogue refinery close to Gibraltar but it was removed at the end of those trials and is currently in storage while Quadrise and US-based commodities and oil broker Freepoint Commodities – with which it has worked since last November – look for new opportunities.

One of those may be in the offing: last month Quadrise announced an agreement with an unnamed European refiner to develop a potential project for its MSAR synthetic fuel oil; the agreement covers proof of concept and scoping phases, according to the online investment portal Proactiveinvestors.

To get into the ship bunkering business, Quadrise needs an operator to get involved so that a suitable refinery partner can be identified to deliver MSAR at a commercial scale. It would take about nine months to set up the production, Mr Kirk said, but that could be shortened if a dialogue can be started between a refinery and a consumer. “It could be available very easily by mid-2020 at commercial scale,” he said.

It would have to be a large operator he agreed; perhaps the size of Maersk? “We have remained in contact with Maersk [but] I can’t say anything more about what our current discussions are,” he replied.

This is a classic chicken-and-egg situation: until there is enough MSAR readily available, shipping companies will not base their fuel strategies on it. But until there is enough potential demand, refineries will not make it.

But to give and idea of how this egg could be cracked, Mr Kirk told me of a trial that was being planned to produce about 1,000 tonnes of MSAR per week for power generation in Saudi Arabia, possibly produced in the kingdom or shipped in, or both, which would dwarf the total of 7,000 tonnes produced for the Maersk trial. If a trial of this scope comes off and migrates to a permanent supply contract, I can see that becoming the catalyst for wider distribution and use.

Bergen Investments and its other backers clearly think Quadrise and its MSAR have the potential to make a return on their cash and I admire them for taking the risk, although it’s not something I’ll be putting my pension fund into.

But what about the fuel itself? If you are an owner, operator or manager, would you be attracted to MSAR if it were widely available? Do you have experience of its earlier trials? Email me now to tell me what you think of this potential fuel.

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