An Oil Change for the Global Economy

Renewable energy sources such as wind, solar and hydropower are increasingly becoming more popular. In fact, wind power is the fastest-growing energy source in the world. Presently, there are about 30,000 wind turbines operating worldwide, and that number is ever increasing.

While this is very encouraging news for our environment, the fact remains that the world will be heavily relying on oil for some time to come. Given that oil is a finite resource, and that rapidly emerging economies like China and India have voracious and growing appetites for oil, we must critically look at ways by which we can obtain ever-greater yields from a gallon of oil.

Some technology companies are doing just that — developing ways to “stretch” a barrel of oil so that it can create more deliverable energy. One of these companies is Genoil, publicly traded under the symbol GNOLF.

Heavy Oil vs. Light Oil

A mostly unknown fact is that all oil is not created equal. There is “heavy” oil and “light” oil. It has been estimated that there are 900 billion barrels of heavy oil supplies in the world today, as opposed to 400 billion barrels of light oil.

Sadly, heavy oil, though abundant, isn’t as useful. Of the 85 million barrels of oil that are consumed daily, 75 percent is light oil. Light oil is used for making gasoline, diesel fuel and jet fuel — all of which represent major uses of the world’s limited oil supply.

If you do the numbers, that means that on an annual basis, we are eating into the 400 billion barrels of light oil supplies to the tune of about 23 billion barrels a year. At today’s rate of consumption, we have about 17 years of light oil left, and that does not take into consideration the ever-increasing demand for oil.

Upgrading Heavy Oil

The challenge, then, is to come up with a process that can upgrade heavy oil so that it can become as useful as light oil.

Genoil, based in Alberta, Canada, has developed such a process, which it calls “GHU” (Genoil Hydroconversion Upgrader). The company describes this process on its Web site as “an improved catalytic hydroconversion technology that economically upgrades and significantly increases the yields from high sulphur, acidic, heavy crude, bitumen and refinery residues.”

The CEO of Genoil, David Lifschultz, described this process in simple terms. “Turning heavy oil into light oil — which is what we do — unleashes enormous supplies of oil. Additionally, it can also create energy independence from the Middle East.”

Energy independence from the Middle East is what the United States is eagerly striving for. A process that “unleashes enormous supplies of oil,” as Lifschultz says, can certainly go a long way to create energy independence.

Environmental Costs

Certainly, we must consider how costly the process of increasing the yield of a barrel of oil will be. In this regard, most of us know about the so-called oil sands that exist in certain parts of Canada and the northern United States. From what I’ve read, extracting oil from these sands is becoming more attractive because it is no longer as cost-prohibitive as it previously was. The seemingly ever-increasing price of oil has now made the process of extracting it from sands more economically feasible.

Still, extracting oil in this fashion has its disadvantages. Besides the economic costs, we have to consider the environmental impact. Some experts feel that the extraction of oil from sands leaves the surrounding lands overly compromised and badly damaged. Environmental costs, therefore, must be considered along with economic costs.

Genoil considers its process that converts heavy oil into light oil as environmentally sound. Lifschultz tells me, “Genoil’s upgrading technology not only converts heavy oil into light oil, but also removes over 90 percent of the sulfur and a majority of the nitrogen which cause greenhouse gases that pollute the environment. In that sense, Genoil makes the oil green, or at least greener.”

Economic Costs

Lifschultz goes on to say that his company’s process of converting heavy oil to light oil costs about US$12 per barrel. The cost of oil this week skyrocketed to more than $113 per barrel; and OPEC (Organization of Petroleum Exporting Countries) is refusing to increase production, blaming the weak dollar for pushing the cost of oil so high. In that light, the $12 per barrel doesn’t look at all onerous.

As for the conversion process, “[Genoil’s] technology converts up to 90 percent of heavy oil in one pass, whereas our competition converts only about 65 percent in one pass. In fact, a recent Chinese test shows that our process also removes over 90 percent of the sulfur,” Lifschultz said.

Technologies such as the GHU technology can go a long way in helping to conserve our oil reserves and extracting as much energy as possible from a barrel of oil. When you add to this the fact that many experts see oil climbing ever higher than its present price, one can see how economically feasible the new technologies have become.

So while the world is re-engineering to accommodate wind, solar and hydropower, companies like Genoil are providing ways by which our current oil supplies can be best utilized and even “stretched.” Good luck!

Theodore F. di Stefano is a founder and managing partner at Capital Source Partners, which provides a wide range of investment banking services to the small and medium-sized business. He is also a frequent speaker to business groups on financial and corporate governance matters. He can be contacted at [email protected].

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