QFI.L Regulatory News (QFI)

23 June 2011

Quadrise Fuels International Plc ("QFI" or the "Company")

Update on Progress of Canadian Investments

Quadrise Fuels International Plc holds 20.44% of Quadrise Canada Corporation ("QCC") and 9.6% of Optimal Resources Inc ("Optimal") and is the largest single shareholder in both of these independently managed unlisted Canadian companies.

Optimal is an oil production company licensed to apply the QCC Enhanced Oil Recovery ("EOR") technology exclusively and to competitive advantage. Optimal's key objective is to participate in ownership of incremental produced oil and to secure an equity share in associated extended recoverable proven oil reserves. QCC is contracted to supply specialist services to Optimal, including the manufacture and supply of the EOR 'solvent'.

A field trial programme is well advanced in association with Optimal in the Lloydminster heavy oil area of Alberta. QCC issued a letter to shareholders ahead of its Annual General Meeting held in June 2011 which reported in some detail on progress in this application of the QCC EOR technology. This is a very important programme for QCC and Optimal as QFI has previously reported.

A recent study conducted by CIBC World Markets Inc. estimated that only 20% of Western Canada's conventional crude oil has been recovered by primary production techniques, leaving as much as 77 billion barrels in the ground. Laboratory trials in simulated reservoirs indicate that the QCC EOR technology should promote the economic recovery of a further 20% plus of the original estimated 'oil in place' from a large number of established fields which are either in decline or considered to be technically 'depleted'.

The QCC programme has been considered sufficiently important by the Natural Sciences and Engineering Research Council to qualify for a C$363,000 grant over 3 years which complements the support of experts at the University of Alberta. The university considers this to be a "high-stakes quest to unlock billions of barrels of oil that cannot be economically recovered using existing extracting technologies".

The QCC letter advised shareholders that "the results so far have been very encouraging". The implementation moved from laboratory to the field with the first pilot injection test in November 2010. Various subsequent injection tests have progressed throughout the first quarter of 2011.

The initial injection tests were conducted to assess how the reservoir behaves under various injection conditions and the information gained is being used to design an effective crude oil recovery strategy.

QCC has been producing the EOR solvent in the field since November to support the injection trials, using a small scale on-site manufacturing unit. In preparation for the next phase of EOR development involving a full scale commercial pilot programme, QCC is presently converting a large scale emulsion fuel manufacturing unit into an EOR solvent manufacturing plant to support full scale solvent production. This is anticipated to begin late in 2011 once the injection strategy is confirmed and positive results are obtained verifying the performance of the EOR technology in recovery of incremental oil in the field operations. 

Associated QCC technology development includes conducting reservoir modelling, tracer development and laboratory core flood experimentation and methodology. QCC is ramping up resources and rapidly building a core group of technologists that will support the Optimal growth programme through 2011 and beyond.

The EOR technology development programme will also add to the existing body of patented intellectual property owned by QCC and is expected to offer several related technology licensing opportunities. This is in line with the current QCC business model of leveraging the R&D programme, knowledge base and IP to deliver shareholder value.

Aside from these developments in Canada, the QFI directly managed programme continues to progress broadly as planned and will be the subject of an update report to be released shortly. 

Commenting on these reported developments, Ian Williams, Executive Chairman of QFI said, "The progress made in the EOR field trials is very encouraging. As a large shareholder in both companies, QFI stands to gain substantially from the successful commercial application of the EOR technology, and associated growth in incremental oil production which will accrue when Optimal progressively expands its resource base."

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