January 2015

With low oil prices in the news every day let me open this newsletter with my response to an obvious question: "How will the oil price affect Velocys?" After much thought and discussion I've come to the perhaps surprising conclusion that the low oil price at this time could be the best thing that has ever happened to Velocys. The market for smaller scale GTL is at the early-adopter stage. GTL projects whose rationale is simply to take advantage of the mass-market gas price arbitrage in North America will undoubtedly be more difficult to progress at present. However, for some time, the Company has been focusing its resources towards "special cases": those many local opportunities for smaller scale GTL that are likely to retain their value, even with reducing gas-oil differentials at the major hubs. These projects either utilise economically-priced gas or other low-cost (or even negative-cost) feedstocks, or serve a market where a premium can be realised, for example by producing high-value specialty products or by serving isolated areas where liquid fuel importation costs are very high. Low oil prices will also disproportionately impact large GTL prospects that can't be placed in the most advantaged locations; long term, smaller scale GTL will benefit from the current turmoil.

In this tougher market, quality counts: projects need to use the most competitive technology in order to achieve the best economic returns. Our Fischer-Tropsch technology gives the best performance available in the market; and in the current environment we expect that competitive edge to matter even more.

Velocys enters this period with a strong balance sheet after our successful $85 million fund-raising in September 2014. We have our first commercial plant committed and under construction. And with the unwavering support of major commercial partners and institutional investors, Velocys is well positioned to withstand a tough period for the market and emerge even stronger than it is today.

Please get in touch if you would like more information on any of the items highlighted in this newsletter. Email…

Roy Lipski, CEO

What's new?

UK Court of Appeal judgement

On 8 January, the Company announced the UK Court of Appeal has refused CompactGTL's permission to appeal on one of the patents in suit ('509) in relation to the Intellectual Property infringement case brought against it by Velocys. The injunction restraining CompactGTL will remain in force (see announcement dated 3 October). Determination by the court of damages (or an account of profits) to Velocys is continuing. Read more…

Think Smaller

Towards the end of last year Velocys re-engaged with the London-based brand strategy agency Prophet that developed the Company's new visual identity. The objective was to take a fresh look at how we communicate our smaller scale GTL story simply and clearly to the outside world. As a result we have a new framework of clear messages that will continue to increase the impact of our communications across the industry, to investors and the press. Our high level message is "Think Smaller". Read more…

On the conference circuit

The talk "Smaller scale GTL: a local wax supply solution" was given at the AFPM International Lubricants and Waxes Conference in Houston, USA, 13 November.

Coming soon:

Members of the team will be presenting at the following conferences over the coming months:

In the press

In December, CEO Roy Lipski was interviewed by Malcolm Graham-Wood at Tip TV and contributed an article to The American Oil & Gas Reporter explaining how smaller scale GTL can offer a solution for stranded gas.


Following our presentation at the Gasification Technologies Council 2014 Conference, "Is small-scale GTL the next big thing?" was published in Breaking Energy. Also in November The Alaska Journal of Commerce published "Gas-to-liquids technology scales down to expand access"


This month's announcement that the UK Court of Appeal had refused CompactGTL's permission to appeal on one of the patents in dispute was covered in, for example, The Times and The Telegraph, with the former headlining "Compact victory could give Velocys added fuel". The news was also covered in analyst notes by Macquire and Canaccord, where the latter suggested that every £10 million of settlement is worth 8p to shareholders.


Also in December, the increase in Ervington Investments' holding in Velocys to 11.8% was mentioned in, e.g., The London Evening Standard and The Times and the further share purchases to take it first to 13.1% and then to 14.3% were mentioned by The Telegraph and Everyinvestor amongst others.


In December, the University of Oxford included a case study on Velocys showing the impact of world-class research originating at the university.

Company news

The Company's technical team was strengthened still further this quarter by the appointment of André Steynberg as GTL Technology Specialist and Roger Harris as Technology Development Manager, both of whom are based at our Ohio Technology Centre. André had 35 years' experience at Sasol including 5 years as Intellectual Property Technical Advisor for GTL & CTL technologies. He edited and co-authored the definitive text "Fischer-Tropsch technology, studies in surface science and catalysis". Roger joins Velocys after 10 years' experience with Sasol where he was the GTL Technology Manager for their Business Development team. As well as spending significant time in R&D he was part of the start-up teams for new chemical technologies as well as Sasol's ORYX GTL plant in Qatar.

Our commercial team in Houston was also boosted recently: we welcomed Philipp Stratmann, Business Development Director and David Gonzalez, Project Development Manager. Philipp joins us from InterMoor where he managed the West Africa and global development team. Philipp will be leading our approach to development of project opportunities in Africa as well as joining the existing team in developing accounts in North America. David joins us from BP Wind Energy where he led the development of numerous wind energy projects. He will focus on several project development opportunities that Velocys has identified in North America

We have also strengthened the Company's corporate governance through the appointment of current Board director, Julian West, as Senior Independent Director. Mr West brings forty years' experience of energy policy economics and regulation. Until 2008, he was a Senior Director at Cambridge Energy Research Associates (CERA), leading the firm's oil teams.

Think Smaller™. Velocys is changing the way fuels are made.

Contact us for further information

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Velocys plc trades through its subsidiaries Velocys, Inc., 7950 Corporate Blvd, Plain City, Ohio 43064, USA (Registered in the State of Delaware, USA) and Velocys Technologies Ltd, 115e Olympic Avenue, Milton Park, Abingdon, OX14 4SA, UK (Registered in England No. 5258554). "Velocys", "Think Smaller" and the Velocys logo are trademarks of Velocys. © 2015 Velocys. All Rights Reserved.