QFI.L Regulatory News (QFI)

28 June 2021

Quadrise Fuels International plc

("Quadrise", "QFI", the "Company" and together with its subsidiaries the "Group")

Update on bioMSAR™ and MSAR® projects

Quadrise, the supplier of MSAR® and bioMSAR™ emulsion technology and fuels, low-cost, cleaner alternatives to heavy fuel oil and biofuels, is pleased to provide an update on progress in relation to bioMSAR™, the Company's new cleaner, low carbon fuel, and our active MSAR® projects with Mediterranean Shipping Company S.A. ("MSC"), our industrial client in Morocco, and Greenfield in Utah.

Highlights

· Quadrise is seeing increasing interest in bioMSAR™ from all segments of the energy market that are targeted.

· MSC - bioMSAR™ testing significantly accelerated, with this to be the first fuel tested during the LONO programmes.

· Morocco - 60mt of MSAR® fuel to be manufactured at a bitumen production facility in Norway and shipped directly to Site B. Quadrise on site this week for preparatory work. Current plans are for the trial to be completed in Q3 2021, together with the completion of the Site A feasibility study.

· Utah - Greenfield samples taken and should be shipped to Quadrise this week. Once received at QRF, confirmatory Proof of Concept testing should complete within 3 weeks for both MSAR® and bioMSAR™.

bioMSAR™ Outlook

Quadrise is seeing increasing interest in bioMSAR™ from all segments of the energy market with the momentum towards zero carbon being quicker and broader than was envisaged a few months ago. This is creating significant demand in the sector for low carbon emissions and renewable fuels, incentivising Quadrise to further accelerate its bioMSAR™ testing, development and production plans.

The successful placing and open offer in March 2021 allowed us to advance the medium-speed 4-stroke Wärtsilä engine testing at VTT in Finland, as well as further planned performance and emissions optimisation testing with Aquafuel Research Ltd ("Aquafuel"). As part of this accelerated timetable, 5 tonnes of bioMSAR™ was produced at the Quadrise Research Facility ("QRF") and shipped to VTT in May 2021, with testing now completed. Initial feedback is positive and the report is expected to be received by QFI in July 2021. Further testing at Aquafuel is expected to commence later in July 2021, following enhancements to our high-speed 4-stroke test engine.

Quadrise is delighted with the progress being made on both third-party testing and development and the continuing complementary development work at QRF, which includes fuel additive formulation and performance optimisation for our unique biofuel. This work is integral for planning for larger commercial scale bioMSAR™ testing during the next twelve months with MSC and Greenfield, as detailed below.

Quadrise is undertaking detailed analysis of the crude glycerine market, which will be critical for larger scale bioMSAR™ commercialisation and this includes collaboration with Aquafuel, who have significant experience in glycerine use as a fuel in diesel engines. Quadrise is also evaluating future production options, in a joint project with Aquafuel and a team at the University of Greenwich, led by Professor Pat Harvey. This will include an investigation into algal production of glycerine, which we believe may offer future potential to provide large volumes of renewable glycerine if crude glycerine availability becomes a limiting factor for bioMSAR™. In parallel, our RDI team is testing low-carbon future fuels, including lignins, as part of our net zero solution by 2030 activities.

We are pleased to have renewed our long-standing relationship with Professor Spence Taylor, who has recently joined our RDI team. His significant experience as professor of Surface and Colloid Chemistry at the University of Surrey will enhance our RDI capabilities as we focus more resources on future fuels.

MSAR® Outlook

In certain markets we are seeing that whilst the swing towards renewables and lower emission options is accelerating interest in bioMSAR™ and increasing the size of its target market, it is also creating some headwinds to hydrocarbon-based fuels and MSAR®, despite the material cost, performance and environmental benefits of MSAR® over project lifetimes. This phenomenon is being exacerbated by refinery reconfigurations in response to the changes in demand fundamentals driven by IMO 2020 and the COVID pandemic. Whilst not directly impacting our current trial and project activities, the result of these trends is that MSAR® economic benefits for refiners have reduced, and in some cases become marginal, temporarily. We and others believe that this position will change when distillate demand increases and the HFO-distillate spread widens. In the meantime, we are working diligently to demonstrate the long-term benefits of MSAR® projects and, where there is a strong pull for bioMSAR™, looking at opportunities to develop commercial supplies of both fuels in parallel on an accelerated basis. An update on progress across our key MSAR® projects is provided below:

MSC

Under the JDA with MSC Shipmanagement we are finalising the preparatory work to enable LONO trials aboard MSC container shipping vessels. This work has taken a little longer than anticipated, as the availability of OEM and Class Society resources has been limited at times and the marine sector is stretched due to COVID and various evaluations and tests of future fuel options, though the project team expect these issues to be resolved imminently. The most significant change during this period has been a desire from MSC to see bioMSAR™ testing significantly accelerated and for this to be the first fuel tested during the LONO programmes. During H1 2021 we engaged two highly experienced marine and mechanical engineers to work on the MSC project. The engineers have detailed knowledge and experience of MSAR® performance from diesel engine testing for stationary power plants and marine vessels. Project activities in 2021 with MSC are as follows:

· Planning and preparatory work to enable bioMSAR™ and MSAR® LONO trials to take place on vessels powered by a MAN ME engine and a Wärtsilä Flex engine.

· Procurement of fuel booster systems and the process of preparing the vessels and the fuel production site in the second half of 2021 to enable LONO trials to commence at the earliest opportunity. This work will continue during the remainder of 2021, with a number of options being investigated in parallel to reduce cost, time and risk.

· Once trial agreements are concluded this year, the projects for production and delivery to the vessels will commence for the 4,000-hour LONO trials that are still targeted to be completed by mid-2022.

Ensuring the successful delivery of the marine trials with MSC and progressing this to commercial supply contracts has been our primary focus during 2021, however we continue to have discussions with other owners and operators in the marine market, especially with regards to bioMSAR™ as a transition biofuel solution for earlier decarbonisation.

Morocco

Quadrise and the client continue to progress the overall project with the focus now on the industrial scale trial at the second client location ("Site B"). Work is progressing well, with the pumping and heating unit (which will be used for both the industrial scale trial at Site B and the commercial scale trial at "Site A") having been fabricated, tested at QRF and awaiting shipment. Site preparatory works have been agreed with the client and Quadrise has taken on additional scope to expedite this element. This includes Quadrise visiting the site in late June 2021 in preparation for the trial.

The Site B trial requires 60mt of MSAR® fuel, which is outside of the current manufacturing capacity of QRF. The fuel will be manufactured at a bitumen production facility in Norway and will be shipped directly to Site B. Current plans are for the trial to be completed in Q3 2021, together with the completion of the Site A feasibility study. This is, however, subject to easing of COVID restrictions both in the UK and Morocco. QFI will be paid around £100,000 for the industrial trial and phase 2 study under existing agreements with the client. 

Following the successful conclusion of the industrial trial, the plan remains to complete the commercial trial at Site A, which is the client's major fuel oil consuming site, in H2 2021. A project is currently being progressed at QRF to enable it to manufacture MSAR® in support of the Site A trial and reduce our dependence on third parties. Assuming the successful conclusion of these trials, the intention would then be to conclude a commercial supply agreement covering one or more of the client's sites in Morocco before calendar year end. Planned milestones are therefore:

· Q3 2021 - industrial scale trial at Site B. Complete phase 2 feasibility studies for the commercial trial at Site A.

· Q3/Q4 2021 - commercial trial at Site A, subject to successful outcomes from the Site B trial.

· Conclusion of a commercial supply agreement with the client, after the successful completion of the commercial trial at Site A.

Utah

As previously noted, the Commercial Trial Agreement ("CTA") with Greenfield covers testing at the Petroteq Oil Sands Plant ("POSP") located at the Asphalt Ridge Facility in Utah, USA, which is managed by Greenfield. The first phase of the CTA ("Phase 1"), for which Quadrise is being paid $150,000, includes: 

· Proof of Concept ("POC") formulation and test work at QRF using oil samples supplied by Greenfield.

· Loan of Quadrise MSAR® commercial production equipment, test equipment and supply of additives. 

· Supply of specialist services and personnel for the commercial scale demonstration trial to produce 600 barrels (100mt) of MSAR®.

The POC formulation and test work, originally scheduled by the client at the end of 2020, was reliant on representative heavy oil samples being received at QRF. These were unfortunately delayed due to various external factors affecting the start-up, commissioning, permitting and operations at POSP.

These issues have now been resolved and Greenfield have indicated that samples have been taken and should be available for shipment in June 2021. Once these have been received at QRF, we expect the confirmatory POC testing to be complete within 3 weeks for both MSAR® and bioMSAR™.

Pending the successful completion of the POC testing, Quadrise will work with Greenfield to review and advance fast-track plans to complete Phase 1 at the earliest opportunity. The objective is to progress to commercial MSAR® production at facilities capable of treating 10,000 barrels of oil per day ("Phase 2"), including a conditional MSAR® licence to Greenfield subject to commercial agreements.

Investor Event

The Company confirms that Mike Kirk, Chairman, and Jason Miles, CEO, will provide a live investor presentation via the Investor Meet Company ("IMC") platform on 30 June 2021 at 2.00 p.m. London time.

The Company is committed to ensuring that there are appropriate communication structures for all elements of its shareholder base so that its strategy, business model and performance are clearly understood:

· The presentation is open to all existing and potential shareholders.

· Questions can be submitted pre-event via your IMC dashboard up until 09.00 on 29 June 2021, or at any time during the live presentation via the "Ask a Question" function. Although the Company may not be in a position to answer every question it receives, it will address the most prominent within the confines of information already disclosed to the market. Responses to the Q&A from the live presentation will be published at the earliest opportunity on the Investor Meet Company platform.

· Investor feedback can also be submitted directly to management post-event to ensure the Company can gather the views of its shareholder base.

Investors can sign up to Investor Meet Company for free and add Quadrise Fuels International plc via: https://www.investormeetcompany.com/quadrise-fuels-international-plc/register-investor

Investors who have already registered and added to meet the Company, will be invited automatically.

Mike Kirk, Chairman of Quadrise, said:

"Quadrise is delighted with the recent progress across its main projects as well as the increasingly enthusiastic market response to bioMSAR™ - our recently launched cleaner, low carbon alternative to heavy fuel oil.

The positive initial feedback from testing of bioMSAR™ on a Wärtsilä 4-stroke engine in Finland is very encouraging and we look forward to receiving the full report in the coming weeks. This a key milestone towards being able to undertake larger commercial scale testing during the next twelve months with MSC, where we remain on track to complete the 4,000-hour LONO trials by mid-2022.

In Morocco, commercial scale testing with our client is on track for completion in H2 2021 and, assuming the successful conclusion of the trial programme, the intention is to conclude a commercial supply agreement before the end of 2021.

Finally, we look forward to receiving samples from Utah, completing the necessary testing at QRF, and then progressing the MSAR® and bioMSAR™ heavy sweet oil opportunities with Greenfield and Valkor in the USA."

For further information, please contact: