The Abrams Clean Tech Report

 

On Creating Value – The Case of SulphCo

Wednesday, January 28th, 2009

Today I wanted to write about a company whose customers are oil refineries because theirs is an interesting case of value creation to ponder. You’re probably wondering how ‘green’ this is, but bear with me – I’ll get to that part. Where I wanted to go with this for now is the following – and that is this: if you can’t provide some level of lasting value to the marketplace, (and today’s market is making it even harder for everybody – you really have to have something of value, of necessity, for the market to be supportive of it), you’ll be hard pressed to build business. You have to be able to create value. Nothing else is making the cut in today’s market. What do I mean by this?

Let’s look at one company targeting the oil industry, refineries in particular. The oil industry is actually a good a place to look for a case study in value creation, since we’re still not able to say we’re no longer hooked on oil, (no matter how fast many of us would like to say otherwise) – and the oil industry’s going through changes that make it interesting to consider for the purposes of this blog.

Refineries are as you probably know, increasingly looking to increase the value they can extract from every barrel of oil that comes through the door. This also means lowering the sulphur content of the oil they’re refining. I’m all for lowering the sulphur content of oil, as sulphur can be a source of acid rain; it can also deactivate the catalytic converter in your car. So, my thought is, if a refinery can theoretically use a barrel of oil and its corresponding petroleum products in a slightly more environmentally friendly manner, AND get to fuel more cost-effectively, enabling them to shave off some costs in the refining process, why wouldn’t they? This is what SulphCo’s technology is designed to do. And this is what they plan to do for refineries.

The company has been around a while, having gone public in 2001. I even briefly mentioned SulphCo in a blog note back in June of last year. After watching the press releases come in for a while, I decided to investigate further, and ended up speaking with SulphCo’s Chief Technology Officer, Dr. Florian J. Schattenmann late in the Fall. Briefly, a bit of background: headquartered in Houston, Texas, SulphCo was founded by Dr. Rudolf Gunnerman to develop and commercialize its Sonocracking™ technology, which utilizes high power ultrasound and is designed to reduce sulfur content in crude oil while simultaneously improving the overall quality of the crude. Basically, the technology is designed to upgrade sour crude oils into sweeter, lighter crude oils, producing more gallons of usable oil per barrel, while at the same time, desulfurizing crude oil and other oil related products.

“We can get to fuels more cost effectively, and get to fuels with less environmental impact as well (less sulphur compounds),” Schattenmann said to me in our phone call last month. “We’re trying to take the fuels and improve the quality of them – our goal being to take an existing fuel and clean it up, with much lower sulphur byproduct.”

The original premise SulphCo was operating under was that by using ultrasound alone, the company could create a higher quality of oil. Though in fact a bit more than that is actually required to make a better, cleaner oil, what’s useful for SulphCo about their original premise is that using ultrasound makes this process of creating a higher quality of oil commercially viable – viable at commercially interesting production rates, that is.

To further explain the science: the company’s original patent, by Professor Yen from USC, claims that you can basically take the sulphur that’s in the oil (chemically bound to some of the oil molecules), and oxidize it by using hydrogen peroxide (a classic oxidant) together with ultrasound. On a molecular level, the hydrogen peroxide donates one of its two oxygens to the sulphur to form water as the byproduct. The treated oil typically has less sulfur, lower viscosity and a higher API. In addition the remaining sulfur has been converted to a different type of sulfur species that can be separated much easier. The oil, the hydrogen peroxide solution and the catalyst essentially come into a reactor, where very intense mixing happens in a cavitation zone (the ultrasound). The reaction takes place in literally half a second or less. The water and oil separate, the water gets recycled, and new hydrogen peroxide is added to offset the used hydrogen peroxide in what is more or less a closed loop system.

“We use the hydrogen peroxide as an oxygen transfer agent – it sort of docks on to this catalyst structure and becomes a very labile structure, though it has some lifetime – so added to the best substrate (sulphur), it can create very good yields,” says Schattenmann. “The way we track this is we take a sample of the feed, look at it [in a gas chromatograph (GC)], and look at the peaks. We also take samples at the outlet of the reaction, and put those in a GC analytical instrument, and then see what happens with the sulphur. The result we see is that the original sulphur species are almost gone, and new peaks representing sulphur compounds with higher boiling points have been generated. So the compounds can be much more easily separated. Ultimately, we think the sulphur’s really working quite well as a substrate.”

SulphCo’s Advantage
The real advantage in all this? In addition to this being an energy-positive process, the resulting sulphur species after treatment have much higher boiling points (whereas the original sulphur species are very difficult to separate, being more soluble in the oil) – and if you do any fractionation and any separation that’s typically done by any refinery, you now have low-value bottoms (the gooey black stuff) and that’s where the sulphur stays. “So the sulphur’s not in the high value fractions, which is what our end customers want and use,” says Schattenmann.

The currently used method, Schattenmann explained to me, and SulphCo’s main competing technology, is hydro-treatment, which Schattenmann told me works well but is extremely expensive, especially for the many smaller refineries that use the hydro-treatment process. These smaller refineries don’t have the capability (and can’t add capability quickly) to refine more because the cost to do so is prohibitive. “So it’s for the smaller refineries that we can really add a lot of value,” says Schattenmann. “Plus, the compounds that are very good for our chemistry are very tough to take out with the current hydro-treating. So we can also help stretch the capacities of existing hydro-treating by employing our low-cost tech up front.”

SulphCo’s Sweetspot
“Every oil or petroleum product has a different sulphur content, so there are quite a few questions we have to answer to qualify an opportunity,” says Schattenmann. “As you would expect, the cost of the chemical additives directly correlates to the amount of sulfur to be removed. One sweet spot would be where the starting value of sulphur is already moderate or low – but where a customer needs to move it lower. For instance – we could treat diesel fuels and other middle distillate streams – a multi-million barrel per day segment – as well as certain crudes that have moderately low sulphur values. But even with higher sulphur oils there are opportunities – it all depends of the specific cost-benefit equation. Getting the sulphur moved to higher boiling points means that the lower boiling fractions have been changed (cleaned). Anything that pushes the sulphur content requirement lower, like new legislation for diesel fuel that requires 10~15 parts per million (ppm), rather than the old requirement of 500 ppm, is really good for us because then we can really help.”

Progress to Date
As for SulphCo’s progress to date, SulphCo is currently in the process of commercially validating their technology on a full-scale basis and has installations in Fujairah, UAE and at a testing site in conjunction with a validation partner in Europe. I just received a press release today, actually, announcing commencement of the firm’s full-scale field trials in Europe.

So – back to my original comments. Create real, lasting value for your customers, and the business will come. My guess is that business will continue to build for SulphCo. They’re focused on creating lasting value for their target customer base – and they’re dealing with a market with a real problem and the very real need to figure out how to get more value from a finite supply of product…a barrel of oil.

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