Advanced BioFuels USA

by Jim Lane (Biofuels Digest)  One of the purest, high-yield financial plays we have ever seen in the energy business is possibly emerging, one that could put fracking returns to shame. Vive le ROI. And Vive le IRR and DCF, while we’re at it.

Catalyst for industry attention is the news that Sylvatex and Valicor inked a Joint Development Agreement to develop and commercialize Sylvatex’s MicroX technology, converting distillers corn oil and other plant-based oil feedstocks into Sylvatex’s proprietary MicroX renewable blendstock.  The JDA will also accelerate commercial scale engineering and expedite early market sales of the MicroX blendstock.

What you need to know for know, from a technical POV, is that Sylvatex technology takes one gallon of free fatty acids (made, in this case, by hydrolyzing distiller’s  corn oil) and one gallon of conventional corn ethanol, creasing thereby two gallons of a diesel fuel blendstock. Here’s an overview of the Sylvatex process.

…

Obvious to everyone is the potential for expanding an ethanol producer’s market with something less mercurial than the export trade, and that’s the US diesel market. As James Bleyer, R&D Manager for Valicor, observed: “The ethanol market is limited by the “blend wall”, the amount of ethanol that may be blended into the gasoline market. With this technology, not only can we expand the use of ethanol as a fuel by breaking into the diesel market, but also diversify from fuel with new, untapped applications.”

But more interesting to us is the arbitrage play.

In this case, $21 million in value-add, per year, for a $3 million investment for the technology bolt-on, at a reference-case 100 million gallon plant. (The opex is fuzzy, but keep in mind that the most important cost, the ethanol and DCO, is already included.)

…

The caveats
There are several, some have a sting in the tail.

…

Fourth, there’s the risk that RINs go away. Or that Sylvatex licensees face delays in getting EPA approvals, or that EPA changes the rules. So far, the gallons of MicroX-based diesel blendstock have been considered as renewable diesel for the purposes of discussing RIN values, but it feels a little fuzzy, since the energy content is bound to be substantially lower even if it is a perfectly good drop-in fuel from the point of view of diesel engine compatibility. Will that 1.7 RINs per gallon figure hold up in the long term, or would this blendstock be assigned into a lower-value category all its own?

Here’s the good news on caveats. Someone with a sharp pencil will see that, even with a low end yield and zero RIN value, there’s a $2 million lift in value per year just in the fuel markets, even if using the worst-possible scenario on RINs (zero) and yields (lower). And, there’s always California LCFS credits even should RINs go away some day.

…

Why Valicor?

For one, Valicor has sold an awful lot of corn oil separation technology to ethanol plants, and a number of ethanol producers would like to see an alternative market to biodiesel, which is in many ways limited to REG which has the technology to handle DCO as a feedstock.

…

Sylvatex creates renewable nanoscale emulsion systems that can be used in not only in fuels, lithium battery manufacturing, and other specialty chemical applications such as food and fragrances.

…

Visualize the technology

You can see Sylvatex here in our latest Multi-Slide Guide.     READ MORE

Sylvatex and Valicor enter joint development agreement (Biofuels International)