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Our objective is to create shareholder value by finding and developing oil and gas reserves principally through the application of our proprietary, patented HTL™ Technology for upgrading heavy oil, and as well, through the monetization of stranded gas reserves through the application of the GTL technology licensed from Syntroleum for the conversion of natural gas to liquids and through conventional exploration and production of oil and gas, primarily in the U.S. and China.
The most significant element of our strategy was put in place with the acquisition of Ensyn Group, Inc. in 2005 and its heavy oil upgrading technology. We intend to apply the leading-edge HTL™ process that we acquired as a critical, value added tool in the development of reserves and production and to establish partnerships with owners of heavy oil reserves where we will build, own and operate commercial heavy-to-light facilities. The use of the HTL™ Technology will allow us to upgrade heavy oil at facilities located in the field to produce lighter, more valuable crude oil at lower costs and in smaller size facilities than required by conventional technologies. Our heavy oil upgrading technology has four key competitive advantages:
- It is field-located and effective at a relatively small minimum scale of 10,000 to 15,000 barrels per day;
- The value of the upgraded liquid product means the producer is able to capture the majority of the price differential between heavy and light crude oil;
- The viscosity of the upgraded product is dramatically reduced, allowing it to be transported by pipeline without the need for light blend oils; and
- Significant amounts of by-product excess energy are produced, replacing natural gas for production of steam and/or power used in heavy oil recovery.
The HTL™ Technology adds significant incremental value, flexibility and risk avoidance to heavy oil producers in areas with existing infrastructure and alternative development options, such as Western Canada, and is also a unique option for the development of stranded heavy oil or oilsands deposits that cannot be produced due to lack of on-site energy or transportation challenges. We believe that these innovative characteristics of this heavy-to-light oil process will provide us with an opportunity to significantly increase our base of oil reserves worldwide through joint venture and production sharing arrangements. We consider the acquisition of the technology a major advance in the implementation of our corporate strategy because it will offer significant potential for broadening our access to project opportunities that might not otherwise be available to us.
Our existing mineral interest holdings, particularly in California's San Joaquin Basin and at the Dagang oil field and the Zitong gas projects in China, provides us with cash flow to pursue the commercial implementation of our heavy oil upgrading technology. We have production at the Dagang enhanced oil recovery project in China, at the South Midway Sunset and North Salt Creek fields in the San Joaquin Basin of California, at the Knights Landing gas area in California and the Spraberry Area of West Texas. Our medium term objective is focused on the Sichuan Basin of China and exploration opportunities in the San Joaquin Basin of California. Our plan is to identify new opportunities where production can be achieved quickly and efficiently to create cash flow to fund our operations and allow us to pursue our heavy oil upgrading opportunities.
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