QFI.L Regulatory News (QFI)

28 June 2011

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

Update on Progress

Quadrise announces a progress report on key programmes directly managed by Quadrise International Limited ("QIL"), a 100% subsidiary of QFI. 

The business of QIL is the manufacture and supply of Quadrise MSAR® emulsion fuel as a low cost replacement for conventional fuel oil in refining operations, steam and power generation and the international marine bunker fuels market.

Fuel oil consumption represents one of the largest liquid fuels markets at a global level - more than 600 million tons per annum. The QIL programmes are directed at developing selective sectors in association with major industry partners to build secure, diverse and profitable outlets for MSAR® fuels.

The 'select and focus' strategy continues to guide management who are making progress on all key projects in association with blue chip business partners and future customers. All projects feature the application of Quadrise MSAR® emulsion fuels technology but differ geographically and in product application. All involve substitution of existing fuel oil by Quadrise MSAR®.

The introduction of new fuels into major markets is a significant undertaking. Success in the medium term is dependent on competitive economics, customer satisfaction and the highest standards of quality control in early conversion applications. The QIL team has unique experience in this regard.

Marine Fuels - A.P.Møller-Maersk

The joint development programme (involving QIL, A.P.Møller-Maersk and AkzoNobel) is moving rapidly to the commercial test phase. A key feature of the programme is the production of a stable emulsion fuel manufactured from different oil refinery heavy residues, with fuel properties that substantially eliminate the need for any marine engine modifications.

A number of extensive land-based marine engine tests have been completed, with final testing scheduled to be concluded in the coming months.

Commercial negotiations are near completion with European oil refiners for the installation of manufacturing facilities to produce Marine MSAR® for a sea-based trial on a designated 105,000 ton container vessel during the second half of 2011.

On 11 February 2011, QIL announced a Royalty Agreement with A.P.Møller-Maersk. This establishes the commercial basis for future conversion to Marine MSAR® across their container fleet with implementation expected to commence in 2012, subject to successful sea trials.

Affordable compliance with new emissions standards has emerged as a major challenge for the shipping industry during the next decade. Strong support is building within the industry for the use of "on-board" marine emission scrubbers as the preferred solution. Conversion to diesel fuels or LNG are also options, albeit limited by availability and/or step changes in operating costs.

The combination of lower cost Marine MSAR® marine fuel and "on-board" scrubbers offers a potentially compelling compliance solution for the marine fuels market. Preliminary commercial discussions are underway with a number of leading global emissions management companies in this regard.

Singapore - PowerSeraya

The Memorandum of Understanding signed on 22 October 2010 provides that Quadrise and PowerSeraya undertake a joint coordinated programme to identify and secure a "manufacturing and supply chain" to deliver Quadrise MSAR® fuel to the PowerSeraya thermal power plant in Singapore. The preliminary scoping of candidate refineries in the region has been completed and confirms a number of viable possibilities. Discussions with several oil majors are now in progress, with a view to undertaking a commercial demonstration prior to commencing term fuel supply.

Saudi Arabia

A definitive project programme with supporting commercial agreement terms is moving through the client review and approval process. Saudi specialists have completed a thorough scoping study identifying the technical and economic value of implementing MSAR® technology in their refining system. A team of client specialists has visited Europe to inspect the R&D and production facilities and Saudi refinery residue samples have been successfully converted to MSAR®.

The discussions on the proposed refinery based installation of a pilot 'proving' plant are well advanced. The next step will be the execution of the final form contracts. This will be followed by engineering designs for plant installations within selected refineries, with the target of producing MSAR® fuel during 2012.

Mexico - PEMEX

Scoping studies have been completed on a major PEMEX refinery to demonstrate the benefits of MSAR® implementation. In addition, the detailed requirements for a commercial trial have been established. PEMEX refinery residue samples have also been successfully converted to MSAR® in Sweden.

Commercial agreements are in the final legal review process, in preparation for execution. These include a defined programme to prepare the site and facilities for the installation of an MSAR® manufacturing plant for 'proving trials'. On success, this will lead to commercial production for a number of applications.

Resourcing

Project activities over the next 12 months requires careful planning to ensure the availability of resources - from skilled manpower to manufacturing plant and formulated surfactants. Selective retainer based contracts have been negotiated with key specialists to assure the availability of skills required for the combined forward project programme. In addition, our alliance partner AkzoNobel has been advised of the projected call on their specialist technical support services and supply of surfactant chemicals. They have provided the required assurances on availability.

QIL is placing an order with Akzo Nobel for the first commercial scale, 1000 ton per day, MSAR® Manufacturing Unit. Specifications have been finalised and fabrication is expected to start early next month following final agreement on commercial terms.

Commenting on recent activities, Ian Williams, Executive Chairman of QFI said:

"The pace of progress has moved up a gear in 2011. QIL is managing several substantial projects with major partners and customers. All of these are financially substantial and some may rightly be described as "game changers" for the industries concerned and for the Company. We believe that MSAR® technology will be replacing fuel oil across several major markets and applications in the near future."

"Shareholders should expect further announcements on QIL's progress during the coming months as agreements are reached, process plants are installed and MSAR® fuel comes to market."

-Ends-

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