Genoil Inc. (GNO-TSXV)
January 30, 2009 Issue
The Most Powerful Name In Corporate News and Information
Genoil Is Well Positioned Having Just Announced A Manufacturing Agreement In South Korea For Their Crystal Sea™ Bilge Cleaner And The Roll Out Of Their GHU® Technology That Converts Heavy Oil Into Light Oil
Genoil is an international engineering technology development company based in Alberta, Canada, that develops innovative hydrocarbon, oil and water separation, and marine technologies for the oil and gas and commercial marine industries.
“engineering technology for the future”, Genoil has designed and developed a
number of important technological innovations, including the Genoil
which economically upgrades and significantly increases the yields of heavy
crude oils and heavy refinery feedstocks into light, clean transportation
fuels; and the Crystal SeaTM Separator, a revolutionary bilge
water treatment system which has successfully met or exceeded the highest
guidelines and standards of the United States Coast Guard and the
International Maritime Organization’s MEPC Resolution 107 (49) MEP for
pollution prevention equipment for ship bilges.
David Lifschultz has a long and successful career in directing companies in the fields of technology, transportation and energy. He is the President and Chief Executive Officer of Lifschultz Investments, a family office as well as Lifschultz Terminal Leasing Inc., a holding and investment company that allocates capital for alternative energy technologies and energy technologies that create greater efficiencies.
From 1980-1991, Mr. Lifschultz was President and Chief Executive Officer of Lifschultz Fast Freight, a surface transportation company with 2000 employees and revenues of approximately $100 million per annum and he also supervised Trans Air Freight Systems, which he sold to Air Express International (AEI). In addition, he supervised Ocean Freight Forwarder, Wolf and Gerber and brokerage clearing house, Loretz & Co. Mr. Lifschultz created the first integrated surface air transportation system.
Interview conducted by: Lynn Fosse, Senior Editor, CEOCFOinterviews.com, Published – January 30, 2009
CEOCFO: Could you give us a closer look at your technology and what sets it apart?
Mr. Lifschultz: “We bring a superior form of the hydroconversion, which gets greater yields of the oil for the purpose of utilizing the heavy oil. There are two gigantic facts that have to be faced in the oil world today and will be faced again, because right now you have a recession and in a recession your oil demand obviously falls. When it falls in a cyclical economic situation it is temporary, and will probably adversely affect the supply of oil in the long-term because the oil drilling will stop. If the economy snaps back we will have less production and higher oil prices in three or four years; much higher oil prices than we had at our peek of about $148.00. The technology converts heavy oil to light oil. The giant factor in the market is that there are 400 billion barrels of proven lighter oil reserves that produce 76 million barrels of light oil per day and 900 billion barrels per day of heavy oil proven, producing 9 million barrels a day. Some of which has sulfur, which contaminates the atmosphere. The technology that we have can access that 900 billion barrels and convert it to 60, 80 million barrels a day. Each million barrels a day takes about $10 billion of infrastructure cost, but it is the only solution to the rising oil price, which will access the heavy oil to meet the demand probably for the next thirty or forty years. The so-called peak oil is really not peaked at the moment as it appears, because it is peaked in the light oil but it hasn’t peaked in the heavy oil. If we didn’t have any heavy oil reserves at all and we could not convert them, we would then have peaked at 400 million barrels and would have started declining. We would probably be wiped out as a reserve in oil in about 20 to 30 years and then we would have zero oil. So the heavy oil we can call on longer if you convert it. Our technology enables the world to access that oil economically and efficiently right now with a rate of return that I already outlined.”
Would you please tell us more about the conversion industry and Genoil’s
CEOCFO: How did you get the people in China to sign on?
Mr. Lifschultz: “We were introduced to a group known as HYT Refinery, which is a private company. Everybody knows that China is the most aggressive technologically in the world, and that is why they are growing so much. They were very interested in new technologies. We find that in the core economies like the US, the institutional bias against change is massive. In emerging countries where they already have oil, they are very aggressive. They are looking for new ideas. In Canada for example we approached the oil-sands operators and we wanted to do joint development of the product and experimentation and so far one of them told us that they have zero amount of money for research and development, which we never heard of in our lives. That may have occurred in the 1930’s in the depression. One of those for example rejects 30% of the oil, because they are still using coking, and they return the coke as contaminated waste to the oil-sands site from which it was taken. But ours would have a zero-waste product for them. So they would make a lot more money. We have not seen the interest there that we see in emerging countries in the Middle East. In Russia we have interest and have had a lot of interest, in China and Venezuela.”
CEOCFO: What about working with the environmental organizations?
Mr. Lifschultz: “There are different ways of expending energies and time in trying to market a product, and we tried going to the market itself where we can obtain the business, rather than lobby with government agencies for litigation to mandate innovations like the Genoil GHU Upgrader. A small company like ours can’t really get involved in trying to get into a lobbying effort. It is just not something that I can see as productive; so why should I do that? I went to the large international oil companies, I reached the board of directors in one of them and one of those giants had an emerging technology section, which loved our technology, which was turned down by their higher executives. So why should I expend my resources there, where if I go to China everybody is interested or if I go to the Middle-East, everybody is interested.”
CEOCFO: What is the timetable going forward?
Mr. Lifschultz: “What we have to do is get the $65 million for that project in China and then in two years we will have our model up and running and making money for which we will make 10% of spread. So if the spread before the oil crash was $40.00, but basically after two years, hopefully it will be something like $30.00, we will make $3 a barrel. With about 20 barrels a day, we will make $60,000 a day times 365, approximately because there will be some downtime for maintenance, but if we were using 365 days times $60,000 a day, it should be something like $18 or $20 million, which is fine. What would it be if there were 30 to 40 million barrels a day that are eventually converted? 30 million barrels a day, if your spread is $30 you are making 900 million a day. I think that the oil prices will go high enough next time around to over $200 a barrel. I look at this as potentially the largest future technology development in the world. It is even a larger development than Microsoft because Microsoft, which has 80% of its market, makes $11 or $12 billion a year. That is with 80% of your software market. That was once the most valuable company in the world, so you can just imagine what it could become in this industry if you are talking about a $100.00 spread eventually. Right now you might be talking about a $30.00 spread.”
CEOCFO: You have other technologies as well?
“We just announced that we did an agreement with DongHwa Entec Co., to
manufacture our Crystal Sea™ bilge cleaner. This manufacturer in South Korea
controls 70% of the shipbuilding market for heat exchangers in Japan; 70% in
China and about 60% in South Korea. Their intention is to sell into the
shipbuilders for the ships that they build. They are also manufacturing for
us in China and is a low cost producer; it is very economic in selling them
to other ships, and also for utilization in the ports. Our goal is to create
a model where we will manage the bilge cleaning for ports. We won’t sell it,
but we will manage the cleaning up of all of the bilges of all the ships
that go into major Asian ports is our goal. This will end oil contamination
in the ports.
CEOCFO: What are some of the challenges working with Asian companies, and how do you make it mesh?
Mr. Lifschultz: “Asian companies are very disciplined. They are like the United States in 1900 you might say. They are very cost-conscious; they work hard to reduce cost. In Asian countries like China, Japan or South Korea, you have to have the best quality and the lowest prices. Even with the best quality if the prices are not the lowest you make no sales; they are very disciplined, they want low prices. We thought that we would market a little higher than everyone else, because the operational costs were lower, but we found we couldn’t penetrate the Asian market with a premium even though we thought that in six months to a year the premium would have been earned. We found that we had to reduce prices in a very disciplined way and searching around the world for components that were the same in lower prices. We had to get those prices to meet the market; not above it. As soon as that price point was equal or below, the whole market opened up to us. Every single door swung open in Asia with that price point. It was equal or lower to everybody else; then the quality meant a lot. It was a very disciplined price point. If you are a low-cost producer and you have the best quality, the sale is going to go through.”
closing, Genoil has a very disciplined, very well thought out approach and a
great technology; why should potential investors pay attention today?
“What is quite miraculous about Genoil is that we are very profitable despite 71% decline in oil, which most people don’t think is going to go down much further. It demonstrates the resiliency of the cost model. It is an interesting cost model because it is based on the spread which means the price of the feedstock, the operating costs subtracted from the finished product.” - David K. Lifschultz
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