Hydroconversion upgrader technology could save shipping over $35 billion per year in fuel costs

Malcolm Latarche
Malcolm Latarche

17 September 2018


Genoil Inc. the publicly traded clean technology engineering company for the energy industry, announced today that it has commenced testing Pemex oil by initiating the passing through of the oil through the upgrader to convert heavy oil into light de-sulphured oil.

Its Hydroconversion Upgrader (GHU®) claims that it could save the shipping industry billions of dollars a year in unnecessary bunker fuel costs. 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. Leveraging on a considerably improved patented fixed bed reactor technology, the GHU can be built alongside existing refinery infrastructure in major bunkering hubs rather than incurring the costs to develop and build all new infrastructure.

Measuring as little as 50m x 80m, the GHU unit costs between $30 million and $80 million to install per one million tonnes per year of capacity. Based on Genoil’s predicted crude prices, which have been reviewed by independent bodies, an initial investment of $30 million could achieve payback in less than three months with current market spreads. As global demand rises for lower sulphur HSFO to meet more stringent environmental regulations, the bunker fuel price spread is likely to increase significantly. “Moreover, refiners have finally blinked in their investment standoff with the shipping industry, loosening the purse strings to reduce fuel oil output ahead of the IMO’s 2020 regulations, with financing finally set to flow into additions and expansions of coking, cracking and deasphalting units in parts of Europe, Asia and South America. Conversely, It is also important to note that if refiners convert to producing a gasoil equivalent, the effect on the world fleet's engines designed for HFO with high sulphur will be adverse versus Genoil’s product, which keeps the heavy oil side but removes the sulphur to make it in compliance – also removing the risk to shipowners of having to foot huge fuel bills, that – according to Mitsui – could bankrupt certain players in the industry.”

Genoil's $48.00 charge per ton including fixed investments, overhead, operating costs, and profit to the shipping industry on a per ton basis amount to about the operating costs of scrubbers, so that it is drastically cheaper for the shipping industry compliance. Genoil expects that the costs for Gasoil, that the shipping industry is planning to use for their fuel, will rise dramatically to at least double the present price ($684.08) to about $1,400.00 per ton as demand greatly increases, while bunker fuel will drop 80% on collapsing demand or to $87.00 from $421.67. Then you add the $48.00 per ton charge of Genoil to the $87.00 bunker fuel cost. David Lifschultz, Chairman of Genoil stated: “Genoil could be 90% cheaper than Gasoil at 2020. I am using a bunker cost today of $421.67 per ton and Gasoil at $684.08 and the Genoil charge of around $47.00. This will produce a dynamic savings for the shipping industry of a 100 billion dollars per year.”

Bunker fuel prices for MGO could rise from current levels of around $650 per tonne to well over $1,000 per tonne, according to some analysts, while a stark reduction in demand for HSFO is anticipated to see prices plummet post-2020. “If we look at just 10,000 mid-sized ships 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 $36.8 billion[1], even with Genoil’s charges for the desulphurization process factored in. Genoil fully expects its Hydroconversion Upgrader to be an attractive and viable option for both upstream and downstream energy sectors, including the global maritime industry, for compliance.”

Genoil is now working on two additional tests. One for a global, independent assurance group servicing the shipping industry for the purpose of advising the shipping industry regarding the Genoil solution to the 2020 sulfur problem and the other is a test for a major, national oil company.