ReGen III is a cleantech company commercializing disruptive, patented technology to recycle used motor oil (“UMO”) into high-value Group III base oils. With a focus on creating sustainable solutions that generate better environmental outcomes and compelling economics, the Company’s ReGen™ process is expected to reduce CO2e emissions by 82% as compared to virgin crude derived base oils combusted at end of life.
In 2022, ReGen III completed FEL2 and value engineering for the Company’s 5,600 bpd UMO Texas recycling facility, where world class engineering, construction and licensed vendor teams – including Koch Project Solutions, LLC, PCL Industrial Management Ltd., Koch Modular Process Systems and Duke Technologies – are providing detailed design, construction, commissioning, and start-up services. In addition, ReGen III’s technology has been validated in two independent pilot plant tests and by Stantec Consulting Ltd., WSP Canada, Wood Group Mustang, U.S. Department of Energy Oak Ridge Laboratory, Tetra Tech, Process Dynamics Inc. and Koch Modular Process Systems.
The American Petroleum Institute, categorizes base oils into five main groups: I, II, III, IV and V. This breakdown is based on a combination of the refining method and the base oil’s properties in terms of viscosity, the proportion of saturates and the sulfur content. The majority of traditional refiners produce Group I through Group II+ base oils, which are used to formulate motor oils for older passenger car engines or for use in some industrial applications. According to the industry research firm Kline & Company and information published by LNG, North American consumption of Group III base oil is in excess of 30,000 bpd, while total North American production of Group III is roughly 6,300 bpd. Additionally, there is only one Group III re-refiner in North America, currently producing 400 bpd of Group III.
ReGen III’s ReGen™ technology, produces a 53% yield of Group III, which is a high-margin base oil used in the formulation of performance synthetic grade motor oils. Group III base oil is the fastest growing group of base oils as more automakers require the use of better-quality motor oils and consumers continue to switch to synthetic- grade motor oils.
US Gulf Coast, Domestic, Spot, Low prices for Group III base oil (June 30, 2023) are over $235/bbl, and trade at a 70%+ premium to Group II base oils, a key offtake of traditional re-refiners.
The Company plans to build or enhance UMO re-refineries and license its intellectual property to third parties around the world. The Company is currently focused on developing its brownfield re-refinery in Texas City, Texas (“Texas Facility”). To date, the Company has:
- Signed letters of intent towards the supply of its annual UMO feedstock and continues to negotiate for additional supplies.
- Signed an initial LOI with Advario for the Texas Facility site and onsite logistical services.
- Engaged Koch Project Solutions, LLC (“KPS”) on an initial engagement basis to provide project execution management services leading up to turnkey delivery of the proposed Texas Facility. Subject to a final agreement expected to be entered into between KPS and the Company, KPS is expected to lead ReGen III’s engineering, construction, and licensed vendor teams (PCL Industrial Construction Ltd. (“PCL”), Koch Modular Process Systems (“KMPS”), and Process Dynamics Inc. (“PDI”)) through the completion of detailed design, construction, commissioning, and start-up.
- Completed FEL-2 and a subsequent Value Engineering (“VE”) review process, led by KPS, which resulted in an updated capital cost of US$293 million for the Texas Facility. Final capital costs are expected to be defined during FEL-3.
- Engaged senior UMO industry experts with operational expertise in re-refining and logistics.
- Received indicative terms for a senior secured debt facility of US$108 million from Export Development Canada (“EDC”) and commenced due diligence relating to the Texas Facility.
- Commenced discussions with several parties interested in an offtake agreement, following the termination of the Company’s offtake agreement with bp Products North America (due to financing delays).
- Engaged National Bank Financial Inc. (“NBF”) to act as a financial advisor with respect to ReGen III’s Texas City capital raise with NBF having launched investor outreach.
- Engaged of Raymond James & Associates Inc. (“Raymond James”), a subsidiary of Raymond James Financial, Inc. (NYSE: RJF), to act as an initial purchaser or placement agent to ReGen III for debt instruments or debt obligations issued by ReGen III to finance the Company’s Texas recycling project.
Re-refining UMO transforms it back into high-quality lubricating base oil. For every barrel of crude oil that is refined, under 1.9 liters (½ gallon) of lubricant is produced. The ReGen™ process produces 119 liters (31.5 gallons) of lubricant per barrel of UMO with a corresponding gross margin in excess of US $100/barrel as of June 2023, versus a corresponding 3-2-1 crack spread of ~US$35/barrel.
Not only is re-refining the highest value use for UMO, but it is also the most environmentally responsible because it prevents UMO from being disposed of improperly or burned as a fuel. Based on a life-cycle assessment study conducted by GHD Services Inc., GHD estimated that CO2e emissions from the Company’s ReGen™ process are 82% lower than comparable, traditionally refined base oils combusted at end of life. Furthermore, based on ReGen’s proposed 5,600 bpd Texas facility, GHD estimated that using the ReGen™ process may reduce up to 903,000 mt CO2e / year from entering the atmosphere by preventing combustion at end-of-life and by producing base oils more efficiently than the equivalent production from virgin crude oil. This would be the equivalent of removing 195,000 passenger vehicles from the road for a year according to the EPA.