Velocys releases strategy update with market focus

By Katie Fletcher | December 28, 2016

Velocys plc recently announced results of its strategy review with mention that construction of its commercial reference gas-to-liquids (GTL) plant in Oklahoma City is complete, and commissioning is ongoing.

The company first announced the completion of construction in September with the release of its interim results for the first half of 2016.

According to the company, the new strategy will build on this and Velocys' leadership position, adopting a business model to increase control over project delivery through a partnership approach and focusing on the most attractive markets.

"Velocys has achieved significant milestones over the last 15 years, culminating in the construction of our commercial reference plant in Oklahoma City, which is now being commissioned,” said David Pummell, CEO of Velocys. “The time is now right to build on our position of strength; we are mobilizing to create world-class partnerships to take leadership positions in key high-value markets.”

Pummell added, “I am confident that we have the right strategy that will deliver a substantive growth business. I look forward to providing further details of the strategic alliances that will underpin this strategy as we roll them out."

The four core themes underpinning the new strategy include strategic alliances and partnerships, a business model to take control but remain capital light, the offer as a one-stop shop, and leveraging differentiated capabilities.

Through its strategic alliances, Velocys plans to focus on creating sustainable high-growth businesses in three markets it identified in the strategy. One of these markets is the supply of premium renewable diesel and jet fuels, and premium wax products from landfill gas and woody biomass in specific high-growth markets, with North American markets as the near-term focus. Another market is monetization of stranded gas, producing premium wax products in North America, as an entry point into other global stranded gas markets. The third market focus is the development of an integrated GTL solution to prevent the flaring of associated gas offshore.

Within its strategy, Velocys identified substantial short-term potential volume and growth by providing the indicative number of plants within five years and 10 years for its large addressable markets. For example, for both renewable jet and renewable diesel plants in the U.S., Velocys indicated 10 plants within the next five years and 20 within 10 years. According to the strategy, an average of one to two plants per year over the next five years would be sufficient to establish Velocys in its key markets and generate sustainable business.

A few further upsides not included in the strategy but identified as possible in Velocys’ strategy presentation, include recovering oil prices broadening the GTL market, blend volume of bio-jet in jet fuel pool exceeding 3 percent, and incentive schemes extending to other states and products.