Heres the whole WSJ article. I was stunned when I turned
the this page after buying RNTK last week!
This is great news about a HOT NEW INDUSTRY... RNTK
is just getting started. Its going to be exciting:
Entrepreneurs Find Way to Pique
Giant Oil Companies' Interest
By PETER FRITSCH
Staff Reporter of THE WALL STREET JOURNAL
With only 40 employees and no commercial plants, Syntroleum Corp. hardly seems like a force in
the oil industry. But the tiny Tulsa, Okla., company has an ambitious plan to become the Intel of oil
-- the supplier of a key technology that it hopes to turn into a gold mine.
At the center of this plan is one of the oil industry's Holy Grails: a technique for transforming natural
gas into easily transportable oil products, such as home heating oil. That's potentially a huge boon for
major oil companies, whose reserve portfolios are bloated with natural gas too far away from
markets to transport profitably. Indeed, some oil giants are already working on their own technique.
But the entrepreneurs behind Syntroleum aren't shy about comparing their technique to the
microprocessors Intel Corp. marketed as the value inside personal computers ("Intel Inside").
President Mark Agee presents visitors with a copy of Intel Chairman Andrew Grove's book "Only
the Paranoid Survive" and vials of synthetic oil labeled "Syntroleum Inside."
As much as half of the world's five quadrillion cubic feet of natural-gas reserves are too remote from
markets to justify the cost of transporting them. That's enough gas to satisfy the world's energy
needs for a generation. Turning it into liquid would vastly reduce those transportation costs and
transform idle natural gas fields into massive profit centers.
The industry has struggled to profitably convert gas molecules into liquid fuel since the 1920s. While
giants like Exxon Corp. and the Royal Dutch/Shell Group now boast of their own gas-to-liquids
breakthroughs, closely held Syntroleum has its own conversion process that uses simple air instead
of expensive pure oxygen.
Syntroleum's work is something "we need to follow extremely closely," says Greg Matiuk, Chevron
Corp.'s vice president for strategic planning. Meanwhile, after working for years on their own,
Texaco Inc. and Atlantic Richfield Co. have decided to also license Syntroleum's technology. The
companies haven't publicized terms of their licensing agreements.
Arco and Syntroleum plan to build a gas-to-liquids plant in Washington state while Texaco will use
Syntroleum technology to build a plant floating atop a barge. Securities laws prevent oil and gas
companies from booking reserves that have no market. But with Syntroleum's process in place,
Arco could potentially add 10 trillion cubic feet of stranded gas in Alaska to its portfolio, doubling its
total natural-gas reserves.
Syntroleum is really the story of its chairman, Kenneth Agee, a Tulsa chemical engineer and the
younger brother of Syntroleum's president. While working for a local natural-gas pipeline company
in 1984, Kenneth Agee developed a propane plant that only had use for half the gas at its disposal,
because of thin local demand.
Seeking ways to transport the remaining gas to other markets, Mr. Agee began spending lunch
hours, evenings and weekends studying the earlier efforts to convert gas to liquid fuels. That brought
him to the work of the Nazis and apartheid-era South Africans: Both faced oil embargoes and
always at a financial loss -- managed to turn gas into liquids through a complicated 60-year-old
process known as Fischer-Tropsch that combines gas and oxygen at high temperatures to create
synthetic gas. Iron or cobalt-based catalysts then react with the mix to create hydrocarbons.
Mr. Agee figured that the key to making the process more efficient and economical was to eliminate
the use of pure oxygen. He also concentrated on developing a new proprietary catalyst that wouldn't
produce a product that was too waxy and thick to move through pipelines -- a longtime problem for
scientists.
Raising $25,000 from family and friends, Mr. Agee built a small reactor in a backyard metal shed.
There, working alone, he began cooking the catalysts crucial to liquefying gas. Eventually, liquid oil
began filling test tubes. "I knew just enough to be dangerous," says the laconic scientist.
Mark Agee had become involved by then, and the brothers raised $600,000 in venture capital. A
small pilot plant was soon built in a small Oklahoma cow pasture, and summer interns from Tulsa
University were doing sophisticated lab work.
In 1993, in the course of trying to raise $75 million to build a commercial plant, the brothers came to
the attention of big oil companies. The giants either sought to buy Syntroleum out or force it into an
exclusive licensing deal.
Afraid their technology would simply wilt on the corporate shelf, the Agees resisted. "Can you
imagine where personal computers would be today if Bill Gates had left it to IBM?" asks Mark
Agee. Instead, he came up with licensing arrangements modeled on those of the computer industry,
wherein Syntroleum could use information gleaned from one oil company to improve its conversion
process and pass on the improvements to other companies.
As a result, Syntroleum has become a catalyst for the flow of technology between rival oil
companies and is speeding development of an economically viable gas-to-liquids process. "They are
creating the gas-industry equivalent of the PC standard," says petroleum analyst Paul Ting.
But talks with big oil companies dragged on, and Syntroleum grew desperate for capital. The
companies wanted total control and they were more than a little skeptical. After all, their own
scientists had tried unsuccessfully to crack the code for years.
Then, in October 1996, Exxon disclosed its own "major breakthrough" in gas-to-liquids technology,
along with plans for a monster plant in Qatar. Exxon remains largely silent on its science; it does say
it has developed its own catalyst, but its process still relies on pure oxygen.
Days later, Syntroleum signed a licensing deal with Texaco -- on Syntroleum's terms. Agreements
with Arco and the USX-Marathon Group's Marathon Oil Co. soon followed. "Once Exxon said it
could be done, we were suddenly able to get beyond junior company researchers and get inside
boardrooms," Mark Agee says.
Enrique Iglesia, a University of California-Berkeley chemical engineer working for Exxon, says, "All
the other companies thought they'd sit back and wait until 2030 to buy the technology off the shelf.
Now, they're scrambling."
Wall Street has taken notice. SLH Corp., a Shawnee Mission, Kan., venture-capital concern, has
invested $5 million in Syntroleum and holds a 32% stake in the company. On Friday, SLH shares
closed at $53.75, down 25 cents, in composite trading on the Nasdaq Stock Exchange. Excluding
the $50 million book value of SLH's cash and other assets, that implies a market value of some
$200 million for the company's stake in Syntroleum and a value of over $600 million for all of
Syntroleum.
Remarkably, all the hoopla obscures the fact that Syntroleum still hasn't built a commercial plant.
Officials say that will change next year, when construction of Texaco's floating plant begins. "That
will be the push the technology needs," says Malcolm Peebles, the former head of Shell's
international gas division.
Standing in a Tulsa warehouse, Ken Agee looks wistfully at the tubes, reactors and gas cylinders
that once sat in his backyard shed. Soon, they will be transferred to a state-of-the-art laboratory at
a secret location, along with a 1,000-pound safe holding his catalyst formulas. "I guess it's not just
me and my crazy ideas anymore," he says. |
