Syntroleum and Sinopec Sign MoU for GTL and CTL Plants in China; $100 Million to Flow to Syntroleum

13 February 2007

Syntroleum and Sinopec have signed a memorandum of understanding (MoU) to advance Fischer Tropsch (FT) technology in China, based on Syntroleum’s proprietary nitrogen-diluted synthesis gas conversion technology. Syntroleum CEO Jack Holmes made the announcement during the fourth-quarter earnings conference call.

The deal would see the construction of a commercial-scale Gas-to-Liquids (GTL) plant and the development of a demonstration-scale Coal-to-Liquids plant in China. The non-binding agreement calls for Sinopec to provide $20 million a year over the next five years to Syntroleum to support its Fischer-Tropsch technology.

Both plants would be fully capitalized by Sinopec, while Syntroleum will provide the technology. The results from the projects, according to Holmes, will form the basis to jointly market the FT technology to third parties in China.

The two companies will next negotiate a definitive agreement.

Sinopec also indicated its commitment to become the main engineering, procurement and construction (EPC) contractor for Syntroleum’s planned 50,000 barrel per day GTL facility in Papua New Guinea (PNG), said Holmes. In December, Syntroleum Corporation signed a Joint Development Agreement with Kuwait Foreign Petroleum Exploration Company, K.S.C. (KUFPEC) for that facility.

When complete, the plant will produce 50,000 barrels per day of Syntroleum S-2 synthetic diesel—a paraffinic, high-cetane distillate fuel essentially free of sulfur, olefins, metals, aromatics or alcohols—and other high-valued products. (Earlier post.)