ReGen III is a cleantech company, building a green project with compelling economics, that is not reliant on government subsidies. ReGen III owns a portfolio of patented technologies that enable used motor oil (“UMO”) re-refineries to produce a higher value product mix of base oils than traditional methods. Our 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 33,000 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.
Our re-refinery technology requires lower initial capex and ongoing opex over a traditional refinery, yet it yields higher margin products. For example, the US Gulf Coast, Domestic, Spot, Low prices for Group III base oil (25 Nov 2022) are over $270/bbl, and trade at a 60%+ premium to Group II.
We plan to build or enhance UMO re-refineries and license our intellectual property to third parties around the world. We are currently undertaking engineering work for a brownfield re-refinery to be built in the US Gulf Coast (“USGC”). To date:
- The Corporation has signed letters of intent towards the supply of our annual UMO feedstock and we continue to negotiate for additional supplies.
- The Corporation entered into a sales, purchase and offtake agreement for 100% of our annual production with bp Products North America Inc., a subsidiary of bp PLC.
- The Corporation has 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 USGC Facility. Subject to a final agreement expected to be entered into between KPS and the Corporation, KPS is expected to lead the Corporation’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. FEL-2 and a subsequent Value Engineering (“VE”) review process, led by KPS, are complete and resulted in an updated capital cost of US$293 million for the Texas recycling facility. Final capital costs are expected to be defined during FEL-3 (FEED).
- 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.
Re-refining UMO transforms it back into high quality base lubricating oil. For every barrel of crude oil that is refined, under 1.9 liters (½ gallon) of lubricant is produced contributing to a gross profit margin of only US $8/barrel, according to the Holly Frontier’s Q1, 2021 financial statements. The ReGen™ process produces 119 liters (31.5 gallons) of lubricant per barrel of UMO with a corresponding gross margin in excess of US $115/barrel, as at Nov 25, 2022. The difference in re-refining versus refining economics is profound.
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, GHD stated that, based on ReGen’s proposed 5,600 bpd Texas facility, 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.