July 2015

As you may be aware following our announcement on the 6th July I have been appointed as acting CEO of Velocys. We are very clear that it is business as usual within the Company. The focus, strategy and objectives of Velocys remain unchanged. Led by our strong senior management team and Board we will continue, with steely resolve, to drive towards our goals, including the delivery of our commercial reference plant and securing additional projects. I am particularly pleased to see the tangible progress we are making on the construction of the Oklahoma City plant, as shown in the photographs below.

I would like to say a few words about the competitive environment in which we operate. Development of a new process technology such as ours takes time and money. Velocys and our partners have invested 15 years and over $300 million in smaller scale GTL technology. This, and our exhaustive and proven global patent protection, now represents a considerable barrier to entry to competitors. In such a market environment competitive technologies that are ready for commercial deployment do not appear without considerable warning.

The status of our technology development relative to competitors speaks for itself. Velocys technology has been selected for four commercial projects and the company has a commercial reference plant committed and under construction.

That said, fundamentally we believe that at this stage of the development of the industry we are not in competition with other companies. We are all trying to establish this new industry, a thriving smaller scale GTL industry; and each new project being developed helps to make this a reality.

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

Susan Robertson, CFO and acting CEO

What's new?

ENVIA Energy's Oklahoma City GTL project

On 15 May ENVIA Energy held the ground-breaking ceremony for the joint venture GTL project to be located adjacent to Waste Management's East Oak Landfill site. Commercial operation is expected in the first half of 2016. Read more…

We are delighted to be able to share with you photographs of progress made to date on the project.

Construction underway

Completed Fischer-Tropsch (FT) reactor cores coming off the production line at Shiloh Industries, Ohio

Final stages of the build of a commercial four-core FT reactor

Module construction earlier this year at Ventech Engineers, Pasadena, Texas

More photographs can be viewed here.

Ashtabula GTL progress

On 10 July the Ohio Environmental Protection Agency granted the water permit for the Ashtabula GTL project that Velocys is developing. Jeff McDaniel, Commercial Director, said, "We are delighted with this ruling, which significantly advances the project towards a final investment decision". Read more…

Latest scientific publications

The Company approaches its technology development with rigour and thoroughness. Velocys has completed over 1.3 million hours of catalyst testing in the laboratory with 21,000 hours of testing at the pilot/demonstration scale. Because of our policy of transparency concerning test results, the claims we make on catalyst life and conversion efficiency etc. all be substantiated by publicly-available, peer-reviewed data. The latest such paper is: Heinz J. Robota et al., "High activity and selective Fischer-Tropsch catalysts for use in a microchannel reactor", Catalysis Surveys from Asia (2014) 18(4),177-182.

Please contact us if you would like to receive a printed copy of this paper.

At the 16th International Conference on X-ray Absorption Fine Structure (XAFS16) to be held in Karlsruhe, Germany in August, Fred Mosselmans (Diamond Light Source) and Andrew Beale (RCaH) will give a talk on in situ X-ray micro-tomography. They and their collaborators, including Velocys' Laura Barrio, have developed a state of the art technique that, for the first time, has enabled the simultaneous acquisition of absorption and diffraction data for FT catalyst under reaction conditions. The experiments were carried out on a non-proprietary catalyst. Results successfully proved the capability of the technique to follow structural and oxidation changes of the active phase distribution within a catalyst particle in the micrometric range. This data will help in the rational design of future generations of FT catalyst.

On the conference circuit

Velocys has been invited to present keynote speeches at three GTL-focused conferences this year. The first of these was the Energy Frontiers International Gas Flare Reduction & Monetization Forum in Denver in June where Jeff McDaniel, our Commercial Director presented "Nothing wasted: smaller scale GTL as a better option for associated gas". Jeff will also be keynote at the GTL Technology Forum in Houston later this month (where Paul Schubert, Chief Operating Officer, will also present) and Neville Hargreaves, Business Development Director, will act in the same role at SMi's GTL conference in London in October.

Elsewhere, Roger Harris, GTL Technology Manager, presented "Commercializing and deploying microchannel FT reactors for smaller scale GTL facilities" at the AIChE Process Development Symposium in Houston, USA.

Members of the Business Development team also presented at the World Gas Conference in Paris, the Turkmenistan Gas Congress in Turkmenbashy, Turkmenistan and the Argus Americas Base Oil & Wax Summit in Washington DC. Presentations can be viewed here (in Russian as well as in English where available).

Other upcoming conferences

Members of the team will also present at the following conferences over the coming months:

In the press

The ground-breaking ceremony for ENVIA Energy's Oklahoma City GTL project that was held on the 15th May received wide coverage by the trade press, for example in Natural Gas Intelligence, OPIS, Fuelfix and Hydrocarbon Processing. The OPIS article also mentioned that the US EPA has confirmed that a portion of the products produced at the plant will be eligible for Advanced Biofuel Renewable Identification Number (RIN) credits.

In a BRR Media webcast the Company gave its thoughts on "The Velocys technology offering: status, capabilities and competitiveness".

News that FedEx has signed an off-take contract with Red Rock Biofuels for 3 million gallons of jet fuel a year was reported in e.g., Fuelfix and The Denver Post. Southwest Airlines committed to purchase the other half of the jet fuel produced by the plant, for which Velocys technology has been selected, in a deal signed in September 2014.

A long article in Oil & Gas Investor Australia entitled "A virtual pipeline to the remote outback" (page 72) focuses on CSIRO's approach to smaller scale GTL but it also includes a Q&A and quotes from Velocys.

In other coverage Upstream published a piece entitled "Small-scale GTL has big potential" following an interview with Neville Hargreaves at the Word Gas Conference. At the end of April, Velocys was the focus of Share Radio's CEO interview and in May Alaska Business Monthly commentated on the potential of smaller scale GTL for the North Slope of their state.

Final results for the year ended 31 December 2014, announced at the end of April, were covered by over 20 publications including in Biomass Magazine.

On 6 July Malcolm Graham-Wood wrote in his blog, "CFO Susan Robertson has taken over as interim CEO and is a very safe pair of hands having been with the company effectively since formation. I have no idea of the timescale of this investigation but knowing the quality of the NEDs it will be thorough and fairly processed but not what investors want to hear right now. Velocys has been a favoured stock of mine and for the moment the best course of action should be to await the outcome of the investigation."

In their 16 July analyst note Numis wrote, "There have been no material changes to guidance with good progress being made at both East Oak and Ashtabula". Numis guidance remains "Buy" with a target price of 304p.

Company news

Acting Chief Executive Officer Susan Robertson has held the role of Chief Financial Officer at Velocys since 2007. She joined the Company from the BOC Group (now Linde Group) where she had held various senior-level financial management and business development positions since 1990. Susan helped to set up and then, from 2003 to 2006, served as Vice President and CFO of Japan Air Gases (JAG), a joint venture between the BOC Group and Air Liquide. Prior to taking up her position with JAG, she held finance positions with BOC in Japan, the UK and globally, as well as strategic and business development roles in the UK. Susan has an honours degree in economics from the University of Cambridge and is a chartered accountant (FCA) having originally trained with Arthur Andersen in London.

Susan is supported by a first rate senior management team and a very experienced Board, led by Chairman Dr Pierre Jungels, who previously served as Chief Executive of Enterprise Oil, Executive Director of PetroFina and Managing Director of British Gas. The Company's Senior Independent Director is Julian West, who until 2008 was a Senior Director at Cambridge Energy Research Associates (CERA), leading the firm's oil teams.

Elsewhere, Susan Erickson recently joined our engineering team in Houston in the role of Lead Process Engineer. Susan brings to Velocys many years of experience principally in an EPC environment, including 8 years at Technip where she was Lead Process Engineer for key process units for several GTL and coal-to-liquids projects.

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

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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.