February 14, 1996
(Industry, Trade and Technology)

New technology could produce jobs for Marystown

A new technology that could revolutionize the energy industry and translate into significant long-term work for Marystown Shipyard Limited was introduced in St. John's today. A licensing agreement for the rights to a newly-developed technology that converts liquid natural gas to downstream products for the commercial marketplace was signed by Ian Strachan, president of Northern Gas and Liquids Inc., and Tom O'Dell, chairman and chief executive officer of Carlton Energy Group of Houston. The agreement was also signed by Francisco Villaveces, executive vice- president and chief operating officer of Energia Andina, a company based in Houston that invented the process. They were joined by Premier Brian Tobin, Industry, Trade and Technology Minister Chuck Furey, and Thomas J. O'Reilly, chairman of the Board of Directors for Marystown Shipyard Limited.

Prior to the signing, Mr. Strachan and Mr. Villaveces explained the Cancol process, which uses a chain of four chemical reactors to convert liquid natural gas into Methyl alcohol. Known as methanol, it can then be further developed into non-pollutant substitutes for gasoline and diesel, also providing the option of producing a wide range of petrochemical products such as plastics, acrylics, vinyls and polymers.

Mr. Strachan said investors have spent $30 million on a pilot plant in Houston and are now completing testing on the more efficient, commercial model. He said that conventional plants, using a process known as the Fischer Tropsh method, have a capital cost of $1,000 per ton of methanol production versus the new technology which has an estimated capital cost of $330 per ton. He said: "It is obvious why this newly-developed technology has the potential to revolutionize this sector of the energy industry. A one-million-ton per year conventional plant would cost $1 billion, while a one million ton per year Cancol plant would cost approximately $330 million. Needless to say, countries with abundant sources of natural gas like China and Russia have expressed a keen interest in this technology."

A second agreement was signed between Mr. Strachan and Mr. O'Reilly, on behalf of Marystown Shipyard Limited (MSL), that gives MSL the first right of refusal to build the modules, which would cost approximately $80 million each. Mr. O'Reilly said he is excited about the potential positive impact the agreement could have for the yard. "This represents a very good opportunity for us. We know that the fabrication could be done at Marystown and if this agreement generates the kind of work that we think it can, there is great potential for long-term, high-end employment for the yard."

Premier Tobin said that the project represents government's commitment to support local companies in establishing effective partnerships. "By joining forces with companies outside the province, Mr. Strachan's company is transferring technology and creating employment. Government has strongly encouraged this initiative and has provided support at various stages since it began almost two years ago. This project represents leading edge technology and represents our commitment to the development of the new economy in Newfoundland and Labrador."

Mr. Furey, who joined Mr. Strachan for meetings with Chinese government and oil industry officials on a trade mission in November, said that the long-term lease agreement will create meaningful high- paying jobs for the province. He said: "These are the kinds of projects we must target that will bring new money into our economy and create new jobs for our people. Other than the 275-300 jobs that this project could generate, there will be operational staff required to monitor and maintain the facilities once they are built."

Mr. Strachan was introduced to the China natural gas market by Michael Hoyle of Drexel HydraRig of Fort Worth who travelled to Newfoundland for the signing ceremony. Mr. Hoyle, who has been doing business in China since 1982, said: "Many countries, China especially, have a huge energy shortage and the conversion of their own massive gas fields to methanol and the downstream products have an enormous impact on their economies. The teamwork that the Government of Newfoundland and Labrador and Northern Gas and Liquids demonstrated in China made me, as an American businessman, downright envious. It is obvious that Canada and Newfoundland has a very special part to play in these emerging high energy resource countries."

Mr. Strachan said that pending completion of the final commercial plant testing he has orders for nine plants to date with a high level of interest expressed by other potential customers worldwide. Details for funding the construction of the conversion plants are being finalized with the Export Development Corporation (EDC), a federal government lending agency that provides funding support for companies exporting Canadian products and services to designated countries worldwide.

Contact: John Doody, Director of Public Relations, (709) 729- 0050.