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World One Powerful Presentation Template
SIMPLE FIELD
SOLUTIONSFOR HEAVY OIL
FRACTALSYSTEMS
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AboutFractal Systems
Fractal Systems Inc. is a private Canadian corporation with offices in Calgary, Alberta and Sherbrooke, Quebec.
Fractal Systems Inc. is a heavy oil technology company who develops, patents, and deploys innovative, cost-effective solutions to improve producer margins, de-bottle infrastructure and provide flexibility associated with the transportation of heavy oil.
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Joe Gasca, Executive Director• 30+ years of industry experience, most recently serving as CEO of Ivanhoe Energy
• 20+ years in major leadership positions at Texaco & BG Group
Michel Chornet, VP Technology Development & Engineering• Co-founder of Fractal Systems, Inc. and 20 years of engineering and technology development experience in energy sector
• Shell and H-Power
Ed Veith, COO, Fractal USA• 30+ years of oil company and engineering company experience
• 14 years at Ivanhoe Energy most recently as EVP Upstream/SVP Canada Projects
Dr. Esteban Chornet, Founder• Inventor of JetShearTM technology & Professor of Chemical Engineering at Université de Sherbrooke (Québec, Canada)
• Founder of Enerkem and Fractal Systems, Inc.
Committed investors with energy domain experience• Rho Ventures• Braemar Energy Ventures
Experienced TeamWITH PROVEN TRACK RECORD
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JetShearEnhanced JetShear + ARP
• Decreasing viscosity• Reducing diluent volumes• Lowering transportation costs• Increasing infrastructure utilization• Reducing acid number• Improving product value• Reducing GHG emissions
TECHNOLOGIES ENHANCE PRODUCER ECONOMICS BY
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Fractal TechnologiesTECHNOLOGIES ENHANCE ECONOMICS
JetShear™ Enhanced JetShear™ ARP™
o Reduce diluent by 40-50%
o Successful commercial field demonstration
o Product and process patents in place
o 15-20% more bitumen in pipeline
o Reduce diluent by 50-60%
o Improve product value through upgrading
o Eliminate olefins
o Commercial field demonstration in 2016
o Patent application filed
o 20-25% more bitumen in pipeline
o Reduce TAN by ~ 80% or < 1.0 mgKOH/g
o Commercial field demonstration in 2016
o Patent application filed
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Pipeline Transportation
• Once the heavy oil is to the surface, it cools and high viscosity makes transportation difficult
• Producers use costly diluent to blend with the heavy oil to meet pipeline specifications
Diluent is a light hydrocarbon (i.e. typically condensate or naphtha) that is used to “dilute” the heavy oil in order to improve its transportation characteristics (e.g. lower viscosity and density)
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1
10
100
1,000
10,000
100,000
5% 10% 15% 20% 25% 30% 35% 40%
% Diluent Content
Visc
osity
(cS
t) @
15°
Results from Fractal – Sherbrooke labs
JetShear on Canadian BitumenVISCOSITY SPECIFICATION MET WITH SUBSTANTIALLY LESS DILUENT
JetShear Product Canadian
Cold Lake Dilbit
350 cSt
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JetShear vs. Canadian Bitumen/DilbitTYPICAL RESULTS USING A GENERIC BITUMEN
Properties Raw Bitumen Dilbit JetShear Enhanced JetShear
Density (°API) 7.5 19-20 19-20 19-20Viscosity (cSt) @ 12° C 200,000-1,500,000 £350 £350 £350Diluent content (%) n/a +30 ~17 ~13Diluent displacement (%) n/a n/a ~42 ~55Olefin content (wt %) 0 0 <1% ~0Acid Number (mgKOH/g) 2.5 1.75 1.25 <1.0 w/ARPSulphur content (wt %) 4.75 3.33 4.28 3.8
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JetShear Frees Up Take-Away Capacity20-25% MORE HEAVY OIL BLEND CAN BE TRANSPORTED IN EXISTING PIPELINES (> 400 KBPD at 2 MBPD*)
Diluent content = 30% Diluent content = 17%42% Diluent Displacement
Diluent content = 12%60% diluent displacement
DilBit JetShear Enhanced JetShear
Bitumen
Diluent
* In July 2015 CAPP estimated that oilsands insitu production was 1.24 million bpd in 2014 and is expected to grow to 2.38 million bpd by 2030** In 2014 250 kbpd of additional diluent was imported to supplement insitu Canadian supply
Diluent volumes are reduced lessening the need for imported diluent and improving infrastructure utilization**
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JetShear Location is Flexible
Terminal
Oilsands Mine
SAGD Project
Refinery
Dilbit
Diluent Return
JetShear
Pipeline or Rail
Pipeline
JetShear
TRANSPORTATION OPTIONS ENHANCE PRODUCER ECONOMINCS
Dilbit
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JetShear Technology Background
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The Science• JetShear uses low severity, hydrodynamic cavitation
and heat to structurally modify asphaltene molecules by separating resin groups attached to the asphaltene core
• The rapid change in pressure, below cracking temperature allow microbubbles to form around nucleation sites
• Kinetic energy from cavitation, converts to chemical energy and modifies heavy oil microstructures and the state of aggregation
• The resulting de-structuring lowers viscosity and bulk density with essentially no change in the chemical composition or volumetric yield
aromatics
Saturates
Asphaltenecore
Resin
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The Science
Aromatics ResinsAshphaltene Core
Heavy Oil JetShear™ - Destructured Heavy Oil
Liberates kinetic energy to chemical
energy
Solvation
CavitationHeat
Cyclic Saturates Linear Saturates
Facilitates molecular mobility
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JetShear• Heavy oil blend is delivered from the production facility or
terminal.
• The initial processing step separates the light ends using simple fractionation.
• Light ends are routed around the plant to be recycled back to the production facility or to become part of the final sales blend.
• The stripped heavy oil is sent to the core JetShear module, heated to just below thermal cracking temperatures and pumped through proprietary jet-nozzles where cavitation and mechanical shearing occurs.
• The upgraded product is then cooled and sent to the sales tank or to blending prior to sales.
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JetShear Process Flow DiagramPROCESS UTILIZES HEAT + CAVITATION + OFF THE SHELF TECHNOLOGIES
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Enhanced JetShear• Higher severity treating conditions within the core JetShear
module result in higher viscosity reduction and diluent avoidance.
• Enhanced JetShear adds a processing step to remove olefins with the naphtha cut.
• The naphtha cut is processed in a low pressure catalytic hydrogen polishing unit before being cooled and then blended with the final product.
• Higher diluent displacement is achieved when olefins content no longer limits the aggressiveness of the JetShear treatment conditions.
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Enhanced JetShear Process Flow DiagramPROCESS ADDS HYDROPOLISHING TO NAPHATHA CUT
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Acid Reduction Process (ARP)
• The ARP process consists of a simple configuration of pre-fractionation and a soaker drum with a heater.
• Acids, primarily concentrated in the heavier cuts, are thermally destroyed at temperatures below the onset of cracking thereby reducing the Total Acid Number or TAN.
• In combination with Enhanced JetShear’s hydro-polishing step any olefins generated with ARP can be addressed.
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PROCESS UTILIZES FRACTIONATION + HEAT + OFF THE SHELF TECHNOLOGIESEnhanced JetShear + ARP Process Flow
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JetShearCommercialization
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Commercializing JetShearDEMONSTRATED TECHNOLOGY DEVELOPMENT
1-30 bopd Bench Scale 300 bopd Pilot Facility
1,000 bopd Commercial Demonstration Plant
Class 4+ engineering designs with major EPC firm
Canadian and USGC capital cost studies
August 2014
2009-2010Pre-2009 2012-2015 2016 2016àEnhanced JetShear + ARP
Commercial Demonstration
Patents filed: Heavy oils having reduced total acid number and olefin content
December 2008Patent granted: Treated oils having reduced densities and viscosities
September 2008Patent granted: Process for
treating heavy oils
FEED on first commercial facility
Expand business development internationally
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Commercial Demonstration FacilityPARTNERED WITH LARGE OILSANDS PRODUCER
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• Processed over 100,000 barrels of diluted bitumen over 1 year• Met all milestones established with our partner, a large oilsands producer
COMMERCIAL DEMONSTRATION RESULTSSUCCESSFUL FIELD APPLICATION CONFIRMED
Category Measure Target Actual
HSE Lost time injuries 0 0Performance Yield ³ 98 wt% >98 wt%
Material balance closure £1% £ 1%Throughput 1,000 bpd 930 bpd*Nozzle life ³ 4,000 hrs > 4,100 hrs
Product quality Diluent displacement ³ 40% ~ 42%H2S content £ 20 ppm < 20 ppm
TAN reduction ³ 15% >15% Stability (P-Value) ³ 1.5 >1.5
* Reduced target due to hydraulic limitation in peripheral equipment.
þþþþþþþþ
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NORTH VIEW OF 1000 BPD SKID
Scale-Up Risk is MinimalFIELD PROVEN, MAJORITY OF EQUIPMENT IS OFF-THE-SHELF
• Scale-up risk has been effectively addressed• Two commercial size nozzles successfully demonstrated in the
field with over 100,000 bbls of bitumen blend• Commercial design utilizes parallel banks of 500 bpd nozzles• Commercial runtime > 6 months
1 bpd/nozzle
3 bpd/nozzle
30 bpd/nozzle
150 bpd/nozzle
500 bpd/nozzle
SCALE-UP SEQUENCE
27,000 BPD COMMERCIAL
CONFIGURATION
6 BANKS OF 9 NOZZLES (500 BPD / NOZZLE)
NOZZLES
HP PUMP
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Commercial DemonstrationDEMONSTRATING ENHANCED JETSHEAR AND ARP
Fractal and partner, a large oilsands producer, have undertaken a commercial demonstration of Enhanced JetShear plus ARP
– Diluent displacement up to 60%– TAN levels less than 1 mgKOH/g– Olefin content below the detection limit– Achieve all other pipeline specifications
Project Status– Project partially funded via a grant from SDTC* – Facility modified (i.e. blue process units) to allow JetShear
and ARP (Q2 2016)– Commissioning completed, operations initiated– Results over the remainder of the year– Performance objectives established with partner
* Sustainable Development Technology Canada (SDTC) is a Government of Canada agency that helps bringCanadian clean technologies closer to market, readying them for growth and export markets.
Thermal Oxidizer
Feed Tank
ARP Tank
Product Tank
JetShearProcessBuilding
NaphthaStripper
H2S Stripper(relocated)
Hydro PolishersFront End Fractionator
GlycolCoolers
Soaker Drum
Fired Heaters
HydropolisherFlash Drum
Naphtha StripperReflux Drum
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JetShear Economics
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Value Add from Enhanced JetShear
7 bbls Bitumen
+ 1.35 bbls diluent ($2.98 / bitumen bbl)
+ Pipeline tariffs ($0.68 / bitumen bbl)
$3.65 savings per bbl of bitumen
3 bbls diluent ($6.63 / bitumen bbl)+
+ Pipeline tariffs ($1.50 / bitumen bbl)
2015 CANADIAN BITUMEN EXAMPLE – AT 55% DILUENT REDUCTION
JetShear™ OPEX ($0.82 / bbl)+
Based on average 2015 pricingWTI = US$ 49.35/bbl WCS = C$44.82/bbl DilBit = WCS – C$2.50/bbl Diluent = C$60.28/bbl Dilbit tariff to Hardisty = C$2.00/bbl Diluent tariff f/Edmonton = C$1.50/bbl
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Historical Benefit of Enhanced JetShearBENEFIT DERIVED PRIMARILY FROM DILUENT AVOIDANCE – NO UPGRADING BENEFIT
$0
$2
$4
$6
$8
$10
$12
$14
$16
Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16
C$/
BBL
Enhanced JetShear Net Value Add
30% Blend Ratio-Typical S. Athabasca
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Value from UpgradingUPGRADING WITH JETSHEAR RESULTS IN IMPROVED DISTILLATION PROFILE
• JetShear converts resid to higher value products
• JetShear products have improved distillation profile
– Resid is higher quality requiring less light cycle oil to meet the high sulfur fuel oil (HSFO) spec
– VGO + resid cut roughly equivalent to WCS– Major consulting firm deemed value equivalent to WCS in
a cracking configuration
• Enhanced JetShear results in further improvements
– Resid decrease – VGO increase – Diesel increase– Higher refinery yields of transportation fuels
• Acid Reduction Process (ARP)– Reduces penalties due to high TAN
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
Whole Bitumen WCS JetShear Product Enhanced JetShear Product
Dis
tilla
tion
Prof
ile (v
ol%
)
Distillation Profiles Bitumen vs. WCS vs. Pipeline Spec JetShear Products
Resid VGO Diesel IBP-Kero/Jet
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• Major International EPC firm developed a Class 4+ engineering study at 50,000 bpd
– Adjacent to a new or existing SAGD facility
– Assumes utilities and other off-sites are available
• Significantly lower capital intensity than competing technologies
• Smaller foot print than competing technologies– Approximately 3 acres for a 50,000 bpd
Enhanced JetShear facility
Capex Estimates
Facility Capacity (bpd – bitumen)C
apita
l Inte
nsity
(C$/
bpd
bitu
men
capa
city
)
Capital Intensity - Canadian Location
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
0 10,000 20,000 30,000 40,000 50,000 60,000 70,000
Enhanced JetShear + ARP
Base JetShear
JetShear Range
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Robust Economics Over Historical RangeDECENT RETURNS IN CURRENT ENVIRONMENT
• End-user conceptual returns for a 50 kbpd size facility at 55% diluent avoidance
• Business model assumed: License
• Ten year value of diluent avoidance ranges from a low of $3 / bbl during the financial crisis to up to $14 / bbl
• Exposure to monthly/seasonal volatility in market prices introduce additional risks
• Decent returns are achieved in an environment of “lower for longer”
• Significant upside as oil prices rebound0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
0 2 4 6 8 10 12
IRR
Net Value Add from EJS+ARP (C$/bbl)
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JetShear Environmental BenefitSIGNIFICANT GHG REDUCTIONS ARE POSSIBLE FOR PRODUCERS WHO USE JETSHEAR IN THEIR OPERATIONS
SAGD: PRODUCTION +
SEPARATION
REFINING + RECYCLING + PROCESSING
Transportation = 10 bbls dilbit7 bbls of bitumen +
3 bbls of diluent
SAGD: PRODUCTION +
SEPARATION
REFINING + RECYCLING + PROCESSING
Transportation = 8.5 bbls dilbit7 bbls of bitumen +1.5 bbls of diluent
Diluent Transport = 1.5 bbls of diluent
Wells to refinery analysis including refinery product distribution
Diluent Transport = 3 bbls of diluent
• A life cycle GHG assessment was completed by ClimateCHECK in May 2016*
– The assessment compared a typical Canadian SAGD sourced dilbit with a SAGD project integrated with JetShear to determine the wells-to-refinery GHG impacts
• Reduced greenhouse gas (GHG) emissions on a wells-to-refinery basis
• Less diluent is being transported from the site to the refinery, and back to site
• Less diluent is required to be produced• Less diluent is being processed at the refinery
• Two transportation modes were investigated– Pipeline to / from USGC (diluent via pipeline)– Rail to / from USGC (diluent via rail)
• Wells-to-refinery basis reductions possible– 5.4 to 9.8% for Enhanced JetShear
– 6.7 to 11% for Base JetShear
• Majority of GHG footprint is from SAGD and refining. Point-source JetShear emissions are minimal (approx. 2% of total footprint)
Enhanced JetShear at 50% Diluent Reduction
Typical Dilbit at 30% Blend Ratio
* Fractal Systems’ Partial Bitumen Upgrading to Reduce Diluent Required for Transportation and Improve Quality, Environmental Benefits Report for SDTC, May 26, 2016
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JetShear Summary
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• Successful commercial field demonstration• Engineering completed with major EPC• Focused on commercial deployment• Process and product patents in place• GHG benefits improve oil sands sustainability
• Enhanced JetShear and ARP field demo (2016)• Patent applications filed
• Enhanced JetShearTM
• Acid Removal Process (ARPTM)• R&D continues for Total Diluent Displacement (TDDTM)
ADDS VALUE BY:
Fractal’s JetShear Technology Platform
R&D program adding value JetShear™ is viable today
Reducing acid number
Improving viscosity Reducing diluent
Reducing GHG
Reducing density Improving take-away capacity
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Appendix
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PROTECTING + ENHANCING VALUEThree (3) JetShear patents/applications:
• Patent No. US 8,105,480 – granted January 2012o Process for treating heavy oils
• Patent No. US 7,943,035 B2 – granted May 2011o Treated oils having reduced densities and viscosities
• Patent Application No. US 61/864,827 – applied August 2013o Treatment of Heavy Oils to Reduce Olefin Content
One (1) Acid Removal (ARP) patent application:• Patent Application No. US 61/864,118 – applied August 2013
o Heavy oils having reduced total acid number and olefin content
Filing countries:• Canada and USA• National Filings
o Brazil, Ecuador, Colombia, Mexico, EU, Oman, China• PCT application
Work underway for new patents adding further upgrading & quality