VLS.L Share News (VLS)

(ShareCast News) - Small scale gas-to-liquids company Velocys announced on Tuesday that it has signed a memorandum of understanding establishing a strategic alliance with Morimatsu Jiangsu Heavy Industry, a subsidiary of Morimatsu Industry Company.The AIM-traded firm said Morimatsu will be its preferred supplier of module engineering and fabrication services for the plants.It said the agreement will drive down costs for gas-to-liquids and biomass-to-liquids plants based on Velocys technology, by optimising the design and fabrication of plant modules.Velocys and Morimatsu have already been working together for the past 18 months on the modular design of the Fischer-Tropsch section for a range of plant sizes - a design that Velocys said will deliver targeted reductions in both capital cost and plant footprint.The two companies said they have identified "strategic synergies" that underpin an alliance where the partners shall collaborate with other strategic partners to further drive down costs across all areas of the plant, through innovative modularisation.Velocys said it expects the terms of the MoU to be reflected in legally binding documentation within the next few months.It is the first strategic partnership that has been formalised since a review of Velocys' strategy was completed in the fourth quarter.A core theme of Velocys' new strategy is to deliver, jointly with partners, a fully integrated and financed, cost effective and operations-ready plant solution, the board explained."The potential benefits of further modularisation of smaller scale GTL plants are significant in terms of reduced plant build schedule, reduced risk of delays, lower capex and opex," said Velocys CEO David Pummell."Morimatsu has a world class team of engineers and impressive fabrication facilities in China."I am confident that together, Morimatsu and Velocys will continually improve the plant offer to our customers, underpinning both the economics and the delivery of an integrated solution in our renewable fuels and stranded gas markets.Koei Nishimatsu, CEO of Morimatsu, said his company already has a track record of working in close collaboration preparing the groundwork for a range of modular low cost plants."I am delighted that our companies intend to finalise this strategic partnership."Morimatsu is at the forefront of innovation and technical excellence and we look forward to continuing to work with Velocys as a route to accessing new markets for our engineering and fabrication expertise."