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Feasibility Study By China National Petroleum Corporation (CPECC-Dalian)

Screen Shot 2015-10-25 at 11.23.34 AM

Genoil engineers meets with China National Petroleum Corporation (CNPC) division CPECC

Cost Models for Genoil HYT Project

Genoil retained CNPC’s Dalian design branch to do the feasibility study for the project. The figures below are based on pilot test results with CNPC – Dalian’s calculations.

Background on HYT Project

Genoil and HYT have signed a $ 700 million contract to build a Genoil Hydroconversion Upgrader (GHU) based refinery. The purpose of this project is to enable the new refinery to use lower cost feedback. Instead of buying light, sweet crude to refine, HYT will be able to process a mixture of low-value existing refinery residues plus cheaper heavy sour crude oil. It is expected that this process will result in significant cost savings to Hebei Zhongjie Petrochemical Group Company.

Recent uncertainty in the world’s economic outlook has created extremely volitile oil/feedstock prices. Therefore, Genoil has analyzed a wide range of oil/feedstock prices. During this time the price of West Texas Intermediate (WTI), the world market benchmark for crude oil prices, has fallen by 30%, from $62.80 per barrel to $43.69. Still, the joint venture project with our partner Hebei Zhongjie Petrochemical Group Company remains profitable.

hyt genoil sign agreement

 

 

Detailed Economics of HYT Project Based upon CNPC – CPECC Dalian

TABLE 1 HYT Prices at
28-Oct-08
HYT Prices at
8-Dec-08
World Market Prices
8-Dec-08
US$ (Million) Per barrel US$ (Million) Per barrel US$ (Million) Per Barrel
Product Sales* $530.9 $82.22 $519.7 $80.47 $303.6 $51.19
Feedstock $303.5 $51.18 $275.7 $42.69 $219.4 $33.49
Gross Profit $200.4 $31.03 $244.0 $37.78 $111.2 $17.70
Operating Expenses $10.3 $1.60 $10.3 $1.60 $10.3 $1.60
Depreciation $16.8 $2.60 $16.8 $2.60 $16.8 $2.60
Profit before Interest
& taxes
$173.3 $26.83 $216.9 $33.59 $84.1 $13.02
Income Tax (25%) $43.3 $6.71 $54.2 $8.40 $21.0 $3.44
Net profit before
interest
$130.0 $20.12 $162.7 $25.19 $63.1 $9.77
Cash Profit
(before interest &
depreciation)
$146.8 $22.73 $179.5 $27.79 $79.9 $12.37
Project Returns
IRR – After Debt
Repayment
57% 68% 30%
IRR – Before Debt
Repayment
63% 74% 37%
Bank Debt $70.0 $70.0 $70.0
Interest Rate on
Bank Debt
15% 15% 15%
Term of Debt (Years) 5 5 5
Annual Repayment $20.9 $20.9 $20.9 $3.24

Note: *Product sales per barrel are per feedstock barrel

HYT Project Economics

TABLE 2

Products

HYT Prices
at
28-Oct-08
HYT Prices
at
8-Dec-08
World Market Prices
at 8-Dec-08
Quantity
(1000 bbls)
US$
(Million)
Per barrel US$
(Million)
Per barrel US$
(Million)
Per barrel
Gasoline 106 $9.7 $91.25 $8.2 $77.33 $3.9 $36.77
Light Diesel 1,883 $173.7 $92.25 $170.6 $90.60 $102.6 $54.50
Heavy Diesel 1,360 $120.8 $88.85 $118.6 $87.26 $71.4 $52.49
Gas Oil 2,533 $217.3 $85.78 $213.4 $84.25 $143.9 $56.80
Other Products 134 $9.4 $70.61 $8.9 $80.48 $8.8 $51.20
Total Products 6,016 $530.9 $88.26 $519.7 $86.39 $330.6 $54.96
Feedstock Prices: 6,458 $330.5 $51.18 $275.7 $42.69 $219.4 $33.49

Sources and Assumptions for Product and Feedstock table:

1. World Market prices for products are daily averages of spot prices as reported by the US Energy Information Agency (EIA), as follows:

a. Gasoline: Singapore conventional premium gasoline;
b. Light Diesel Oil: Los Angeles, CA #2 Diesel
c. Heavy Diesel Oil: Price assumed as same ratio HYT Heavy to Light Diesel Oil price
d. Gas Oil: Singapore Gas Oil
e. Other Products: Prices assumed same as HYT prices for other prices: condensate, sulphur, liquid ammonia, and liquid nitrogen.

2. HYT feedstocks are atmospheric residues and M180 Crude. World market price for feedstock taken as EIA reported average daily spot price for Mexico 3hytMaya (for weeks ended December 5 and December 12, 2008), lowest API crude reported regularly by EIA. Note that Mexico Maya is presumably a better quality and more valuable feedstock than Hebei Zhongjie Petrochemical Group Company’s feedstocks, since its API is 22, while that of HYTs feeds are only 16.9 for atmospheric residues and 9.8 for M180. Hence, the price of Mexico Maya may overstate the world market price for feedstocks comparable to those at HYT, and hence understate the profitability of an investment using world market prices.

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The disparity in the price per barrel of oil, regarding the HYT model, compared to the world market price, reflects the Chinese price controls. While there is no certainty that these price supports will be sustained in the future, the Companys ROI at world market prices from this project would produce a 30 percent ROI.

Genoil’s Chief Executive Officer, Mr. David Lifschultz, stated This report is a very important milestone for the Company, as we now have public economic assumptions that demonstrate to HYT, investors and other potential customers the strong economics of Genoils GHU. This report is the culmination of a lot of hard work and we are excited about its conclusions.

As you can see from the tables above, the joint venture project with Hebei Zhongjie Petrochemical Group Company represents a significant opportunity to profitably upgrade heavy oil, despite current low oil prices. In fact, despite a 71% decline from the high WTI of $148.00, the economic model of Genoil’s upgrading process is still significantly profitable. Future oil price fluctuations will continue. Despite this, Genoils Hydroconversion Upgrader continues to offer Chinese customers compelling economic returns.