Post on 06-Mar-2016
description
Creating value and efficiency for heavy oil resources
Corporate Presentation June 2013
2
Disclaimer
Confidential Business Summary
THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATIONS IN SUCH JURISDICTION.
The Confidential Business Summary is being supplied to you solely for your information. No reliance may be placed for any purposes whatsoever on the information contained in this document or on its completeness. No representation or warranty, express or implied, is given by or on behalf of Fractal Systems Inc. (Fractal) as to the accuracy or completeness of the information or opinions contained in the attached document.
This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities, nor shall any part of it nor the fact of its distribution form part of or be relied on in connection with any contract or investment decision relating thereto, nor does it constitute a recommendation regarding the securities of Fractal.
Information for U.S. Residents This document is confidential and has been prepared and submitted for use in the United States solely in
connection with the consideration of the possible investment by a limited group of sophisticated United States accredited investors. The use of this document for any other purpose is not authorized and this document may not be reproduced, transferred to any other person or used without the consent of Fractal.
The contents of this document should not be considered to constitute legal or tax advice and each prospective investor should consult with its own legal counsel and advisers as to all matters concerning an possible investment in Fractal. Each investor must rely on its own evaluation of the investment, including the merits and risks involved, in making an investment decision. An offer will only be made when a purchaser properly completes and executes a subscription agreement.
3 3
Investment highlights Fractal Systems Inc.
Developing field solutions to heavy oil challenges Canadian company - offices in Calgary, Alberta & Sherbrooke, Qubec Currently commercializing first technology JetShear Developing new, value creating technologies for heavy oil
JetShear Technology
A proprietary technology that has a significant cost advantage over alternatives in the transportation of extra heavy oil
Technology has been successfully piloted in Canada; also operated 1,000 bpd capacity facility in 2012 on heavy oil site in eastern Alberta
Received product patent in May 2011 and process patent in January 2012 Completed feasibility study on large capacity, commercial plant for SAGD
with multi-national producer in 2012
Executed technology development agreement with major oil sands producer in January 2013; commercial demo agreement executed in May 2013
4 4
Investment highlights (contd)
Experienced team with proven track record Joe Gasca, CEO
30+ years of industry experience, most recently serving as CEO of Ivanhoe Energy
21 years in major leadership positions at Texaco Dr. Esteban Chornet, Founder
Inventor of JetShearTM technology Professor of Chemical Engineering at Universit de Sherbrooke (Qubec,
Canada), affiliation with NREL Michel Chornet, VP Engineering
14+ years of engineering and technology development experience in the oil & gas and renewable energy sectors
Shell and H-Power Marcel Matte, VP-Projects/Operations
23 years of process engineering and project management experience Most recently established and led Calgary office for Fransen Engineering
Committed investors with energy domain experience Rho Ventures and Braemar Energy Ventures
Bitumen and heavy oil challenges 1. Difficult to transport to market due to high viscosity
Once the oil is to the surface, it cools and the high viscosity becomes a challenge; producers use diluent (very light oil; typically condensate) to blend with the heavy oil
2. Priced lower than conventional (light) oil Due to the heavier, longer chain molecules in heavy oil, it is
more costly to refine into products such as gasoline and jet fuel
3. Difficult to get out of the ground due to high viscosity
5
The Bottom Line Netback to producer Cost of gas for steam generation (challenge 3) Other operating costs Royalties to Canadian govt Transportation expense (challenge 1) Heavy oil differential (challenge 2)
Excerpt from Alberta Oil Sands Presentation July 2011
Basis WTI = $89/barrel
6
Focus of JetShear Technology Challenge 1 Difficult to transport Diluent* required for transportation of heavy oil is expensive
DilBit - sold
@ blend price less tariff
Bitumen/ Heavy oil - produced
Diluent - purchased @ C5+ price plus tariff
* Diluent is a light hydrocarbon (typically a natural gas liquid or condensate C5+) that is used to dilute the heavy oil in order to improve its transportation characteristics (lower viscosity)
Bitumen & Heavy Oils are dense (
0200
400
600
800
1000
1200
Without Jetshear With JetShear
16
16.5
17
17.5
18
18.5
19
19.5
20
20.5
7
API Gravity Viscosity
Pipeline Specifications
May 2010 Monthly Average Results
cSt
density (inverse)
7.5 API feedstock, 70 API ~25% blending ratio
~2.5 API increase ~91%
reduction
Bitumen-Diluent blend provided by a SAGD producer
Results from pilot facility bitumen Dramatic reduction in viscosity
JetShear reduces diluent by ~40%
8
The image cannot be displayed. Your computer may not have enough memory to open the
oil sands mine
blending terminal
refinery
truckers
integrated upgrader
Pipeline Key Bitumen/HO Diluent Upgraded oil
Heavy oil industry value chain
blending terminal heavy oil producer
Integrated producer/upgrader
heavy oil producer
Upstream Midstream Downstream
JetShear application
9
Lloydminster/Provost Heavy Oil Region
Athabasca Oil Sands Region
Cold Lake Oil Sands Region
Peace River Oil Sands Region
SAGD Projects (currently 13)
Thermal Oil Sands in-situ
Conventional Heavy Oil (cold)
Mining Projects (currently 4)
Edmonton
Hardisty
Fort McMurray
Thermal Oil Sands in-situ
Conventional Heavy Oil (cold)
The Canadian heavy oil market
8-9 API
10 API
12+ API
10 API
10
Canada - A growing oil sands market Target volume to more than double in 5 years
From Canadian Assoc. of Petroleum Producers June 2012
Bitumen blend is primary target of business development
Upgraded oil does not need Fractal technology
There are a limited number of potential opportunities in the conventional heavy oil market
* - 2012 avg. diluent (condensate) price in Canada = $100.79/barrel
Leads to growing diluent demand Nearly C$10 billion* market in 2012
000
barr
els
per
day Enbridge Forecast
July 2011
Supplied from Canadian natural gas industry
11
A very simple system Process utilizes heat + cavitation
Simplified process flow diagram
Heavy Oil Pump
Heater
Diluent Pump
Flue Gas
Fuel
Air
Filter to Pipeline
Heat Recovery
Transfer Pump
Heavy Oil
Diluent
Jet NozzleAssembly
Densitometer Viscometer
Flowmeter TemperatureCooler
Transfer Pump
Various pictures 1000 bpd DEMO
12
13
Commercializing JetShear Demonstrating progress
Facility cap
acity (barrels o
il per d
ay)
10
100
1,000
10,000
100,000
1,000 bopd Commercial Demo Operations during
1H 2012
300 bopd Pilot Facility Successfully validated lab results (Aug 09); processed bitumen
blend (May-June 10)
3-30 bopd Lab Facility in
Sherbrooke
Time
Typical commercial
opportunities
Completed preliminary
designs
Feasibility Study
14
Value of reducing diluent Simplified value proposition assuming 50% reduction
Sell DilBit
@ LLB price less tariff
Produce Bitumen or Heavy Oil
Purchase Diluent
@ C5+ price plus tariff
+
7 barrels 3 barrels 10 barrels
7 barrels 1.5 barrels 8.5 barrels
Conventional blending
JetShear (50% diluent reduction)
Three components of value add: Diluent savings per bbl ={1.5 barrels x (cost of diluent per bbl price of dilbit)}/7 Tariff savings per bbl = {(1.5 barrels x dilbit tariff) + (1.5 barrels x cond tariff)}/7 Savings reduced by JetShear opex
Assuming: Dilbit = $60.00/bbl1; Diluent = $80.00/bbl2; Dilbit tariff = $2.00/bbl; Diluent tariff = $1.00/bbl; JetShear opex = $0.80/bbl
Diluent savings = {1.5 x (80.00 60.00)}/7 = $ 4.29/bbl Tariff savings = {(1.5 x 2.00) + (1.5 x 1.00)}/7 = $ 0.64/bbl Less JetShear opex = ($0.80/bbl) Value add per bbl = $ 4.13/bbl
15
Fractal is a private Canadian corporation with offices in Calgary, Alberta and Sherbrooke, Qubec
JetShearTM process adds value by Improving viscosity Improving density Scalable, cost-effective
JetShearTM commercialization on target Pilot facility successfully operated in field Commercial demo in field Technology and demo agreement with large oil sands
producer Feasibility study completed on large commercial project with
large producer
R&D program developing new, value adding technologies New developments to expand on benefits of JetShear
Summary
16
Appendix
17 17
Heavy Oil
Destructured Heavy Oil
JetShear process Using complex technology
* Solvation * Temperature - facilitates molecular mobility * Cavitation - liberates kinetic energy to chemical energy
* Near sonic velocities * High shear forces
Conventional Blend
18 18
Protecting and enhancing value
Two JetShear patents: Patent No. US 8,105,480 issued January 2012
Process for treating heavy oils Patent No. US 7,943,035 B2 issued May 2011
Treated oils having reduced densities and viscosities
Filing countries: Canada and USA National Filings
Brazil, Ecuador, Colombia, Mexico, EU, Oman, China PCT application
Work underway for new patent(s)