LONDON (Alliance News) - TomCo Energy PLC Tuesday said its partner has said the early production system, which TomCo is waiting to be developed for its Holliday project in the US, will be better than originally expected despite the system facing several delays.
The oil shale exploration and development company is solely focused on the Holliday project in Utah, but is waiting for its partner, Red Leaf Resources Inc, to finish developing its early production system, which has faced numerous delays.
Red Leaf Inc neighbours TomCo's Holliday project and is providing its technology to the company. The early production system is a capsule-using technology that allows companies to produce high-quality liquid transportation fuels from oil shale more economically and in more environmentally-friendly ways.
Back in March, TomCo said Red Leaf was accelerating the commercial development of its early production system, but at the end of April, the company said Red Leaf had deferred the target date of completion until the second half of 2016 due to the low oil price environment.
But in May, TomCo said the system, which is being developed in partnership with Total SA, had been pushed back until 2017.
On Tuesday, TomCo noted Red Leaf's latest annual results, which stated that although Red Leaf has delayed the early production system until 2017, that it will now integrate the progress made on its first generation early production system, into a new second generation system which will be an improvement over the first generation system.
That means that although the early production system has been delayed until 2017, the system will be better than originally expected when it is developed.
"In March, we reached an agreement with Total to conserve cash and dramatically slow spending in 2015 to 2016, bring forward ideas for improvement into the design of an improved early production system project, and then re-launch full-scale construction of early production system two in 2017," said Red Leaf.
"This decision forced the cancellation of construction contracts and is expected to result in roughly a two-year delay in the commercial demonstration project. But this delay has created the opportunity for the engineers to design the second generation of our EcoShale technology," Red Leaf added.
By moving straight into developing the second generation system, Red Leaf believes the capsules will be cheaper to build and have a greater capacity, meaning that the economics per barrel of oil will be "substantially improved" compared to the first generation technology.
TomCo did not comment on the news from Red Leaf, only reiterating that commercial-scale production at the Holliday project will not progress until the system is ready. TomCo has already secured all the necessary permits for the project.
TomCo shares were up 1.1% to 0.177 pence per share on Tuesday afternoon.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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Tomco Energy (TOM)