Quadrise: MSAR Economics Are Sound Despite Drop in Oil Price

Quadrise said the company could benefit in the future as oil projects that are delayed or canceled now could lead to less supply in the future.

Quadrise Fuels International plc (Quadrise) [LON:QFI] Friday in a statement to shareholders said that despite the recent drop in oil price the economics of producing its MSAR emulsion fuel alternative to HFO are still sound.

Addressing the fact that its share price had fallen in recent weeks, Quadrise said that the drop has been caused by uncertainty in the energy sector that "has clearly affected investor sentiment."

"The Quadrise MSAR process adds value in refining by replacing high value distillates (principally diesel) with water and chemicals to create a substitute for conventional heavy fuel oil," the company said.

"The economics are therefore driven by the price difference (spread) between heavy fuel oil and diesel, not by the underlying price of crude oil.

"Whilst the spread between heavy fuel oil and diesel has narrowed, the economics of MSAR production in qualifying refineries remains sound.

"QFI is in advanced discussions with several refineries who see significant opportunity in producing MSAR despite the 60% fall in the price of crude oil."

On Tuesday shares traded at a 52-week low of 12.00p, down from a 52-week high of 44.00p on July 9, 2014.

Pressure on refinery margins combined with the fall in oil prices have led to a large number of oil industry project cancellations, Quadrise also noted, saying that that was something that could be beneficial to the company.

"A reduction in future diesel supply capacity should lead to an increase the spread between heavy fuel oil and diesel and consequently improve the economics of MSAR production," it said.

MSAR, or Multiphase Superfine Atomised Residue, emulsion fuel is intended to be sold at a discount to HFO, and the company says that when the new global sulfur cap for marine fuel of 0.50 percent comes into force in either 2020 or 2025, in combination with a scrubber it will offer the lowest cost of compliance both outside, and inside Emissions Control Areas (ECAs).

Last month Ship & Bunker published an analysis of the MSAR plus scrubber solution.