MODEC forms alliance with Velocys and Toyo Engineering for offshore Gas to Liquids technology

Tokyo, Nov. 13, 2007

MODEC has announced the formation of a joint development agreement (JDA) with Velocys and Toyo Engineering to develop and commercialize gas-to-liquids (GTL) facilities for offshore applications. Each member of the alliance brings world-class expertise. MODEC is a leading international company specializing in floating production and storage solutions for the oil and gas industry; Velocys is a leader in the field of microchannel process technology; and Toyo Engineering's plant design experience spans over 45 years and more than 1,400 projects. The agreement is expected to result in a commercial offshore GTL facility by 2012.

"Our companies have the unique and complementary capabilities to enable the offshore oil and gas industry to recover natural gas that prior to this has not been economically viable," said Kenji Yamada, President and CEO of MODEC, Inc.

Wayne Simmons, CEO at Velocys, was understandably excited about the collaboration, stating "MODEC and Toyo Engineering are ideal partners for offshore GTL applications as they bring with them a wealth of experience of what works, and what doesn't in the offshore environment."

Yutaka Yamada, President and CEO of Toyo Engineering had an equal amount of praise for Velocys and their technology, saying "the size and cost advantages of (Velocys') microchannel technology offers the best opportunity to produce commercially significant quantities of synthetic fuels on FPSOs (Floating Production, Storage and Offloading vessels)."

Under the agreement, Velocys will advance its microchannel reactor and catalyst technologies to improve the economics of producing synthetic fuels. Then working with Toyo and MODEC, the process will be made suitable for installation offshore on an FPSO. The GTL application is a tremendous opportunity as over 3,000 trillion cubic feet of natural gas are currently stranded (without access to world markets), enough to produce over 350 billion barrels of synthetic fuels, the equivalent of 70 years of U.S. oil imports.

The primary product of a FT GTL processes, synthetic diesel is a superior alternative fuel that can be used as a one-to-one replacement for petroleum-derived diesel or jet fuel. In fact, the high cetane number and low sulfur content of synthetic fuels can improve engine performance for many applications. For this reason, the U.S. Air Force has set a goal to supply fifty percent of its domestic fuel requirements from synthetic sources by 2016.