Desulphurizing Bunker Fuel/HFO Utilizing IUT Technology

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1 Desulphurizing Bunker Fuel/HFO Utilizing IUT Technology

2 Executive Summary IUT owns Eight (8) U.S. patents related to the use of ultrasonic wave in conjunction with oxidation agent to desulphurization hydrocarbon products. The patented process has been field tested in a US refinery and successfully reduced Sulphur content of gasoline to as low as 12ppm. The technology can easily achieve less than 10ppm by tuning chemicals, temperature and other parameters. IUT is advancing its desulphurization technology for its application on HFO/marine fuel to meet the 2020 IMO Sulphur regulations. IUT is adjusting chemicals/catalyst and reconfiguring the unit for the technology s HFO commercial installation.

3 HSFO:The Market

4 IMO Sulphur Regulations for Bunker Fuel The International Maritime Organization (IMO) will implement new regulation to reduce Sulphur content for marine fuel from 3.5%m/m to 0.5%m/m worldwide in January In 2015, sulfur content in marine fuels consumed in ECAs was capped at 0.1%m/m, the same quality as lower-sulfur distillate materials.

5 World marine bunker demand increases as overall fuel oil demand declines Source: Purvin Gertz: Residue Fuel Market Outlook 342 Million metric tonnes per year of marine fuel consumption according to Platts (Oil Publication).

6 The Marine Industry - Challenges with IMO Sulphur Cap Compliance Refineries unwillingness to add expensive HDS system with little returns Only a small amount of vessels(5%) can afford to install expensive scrubbers for compliance Switching to LNG is not applicable for old vessels Switching to MGO adds substantial cost to shipping business

7 Price differential between high and low sulphur marine fuel HDS Estimated OpX Added Cost($8 to 12/BBL) Estimated OpX Added Cost($4.5/BBL) With 2020 IMO Sulphur Regulations, residual fuel and bottoms will be discounted and desulfurized fuels will be more expensive. The forecast differential will increase to about 300 US dollars/mt.

8 HSFO: Challenges with Current Sulphur Reduction Technologies

9 Currently, desulphurized fuel still contains about 1% Sulphur Challenges of HDS Applied to HSFO Catalyst lifecycle reduced by heavy metals Will require much more hydrogen addition compared to current HDS of residuals Higher temperature and pressure Higher environmental footprint of refineries Substantial investment with little return

10 HDS (refinery application only) vs. ODS (versatile/multi-application) for Bunker Fuel Traditional HDS IUT ODS Hydrogen addition Yes No Pressure 2000 PSI 50 PSI or less Temperature o C 80 o C or less EST Equipment cost $12,000/barrel/day 25% or less of HDS EST Operating costs $8-12/ bbl. $ 4-5 / bbl. Movable No Yes Modular and capacitive No Yes Removal Less effective removal of sulphur Effective with all sulphur of complex sulphur in cyclic compounds compounds compounds Operation Complex, several operators Simple, 1 to 2 operators

11 Expensive to install, typical installation costs range between 200 and 400 EUR/kW Only the vessels consuming 4000 tons annually fuel can afford to install the scrubbers Average engine power must be 4 to 5 MW over to be economical Challenges of using scrubbers High ongoing maintenance costs and uncertainty with respect to effectiveness Contamination and pollution of wash water disposal to the sea. Open-loop systems come with a regulatory risk: lawmakers concerned about ocean acidification may seek to prevent shipowners from simply removing the sulfur from their emissions and then dumping it in the sea. There s also a wider regulatory risk with all types of scrubbers, in that they are not designed to cope with all of the environmental regulations likely to be imposed on shipping over the next decade. S & P Global Platts Investment uncertainty for old vessels less than 10 years of life time Reduced business operation time in the sea due to the downturn Half of the time operation annually can be economical to install scrubber Uncertainty for the HSHFO and LSHFO price differential

12 IUT Advantages IUT advantages in comparison to HDS and scrubbers: Low temperature/pressure Versatile for both onshore/onboard installation Small footprint and low environmental impact Minimum product loss and no specification changes Scalable and mobile Low capital cost/operation cost, making IUT technology an attractive investment with a strong return profile

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14 IUT Process IUT: The application of sonochemistry to petroleum-based liquids combining Ultrasonic with proprietary catalysts and oxidants. magnet probe reaction chamber H 2 O Oil Sulfur Compound Electricity Hydrocarbon Separation A. Oil, water and additives flow together towards the reaction chamber. B. In the reaction chamber, the Ultrasonic probe causes cavitation (formation of small bubbles). These bubbles expand and then collapse, creating energy and heat that facilitates chemical reactions. C. Oxygen is attached to sulfur compounds thereby changing their chemical composition. Chemical reaction inside reaction chamber

15 Process Flow Diagram for Light Oil Oxidation and Ultrasonic Processing Phase Separation Adsorption and solvent regeneration (used only for more complex aromatic sulfur compounds)

16 Successful Commercial Validation Trial for Light fuel in US Refinery

17 One unit capable of processing up to 6,000 barrels per day light oil with double lines Size of equipment is about 20 X 6 The power and electricity requirements for each unit (current size) is approximately KWatts at 480 Voltage, 3 Phase for two line skids The lifecycle is 20 years with exception of the pumps and wear on the ultrasonic parts. Pump lifecycle is estimated to be between 12 to 17 years. Ultrasonic parts will need to be replaced every 3 to 6 months which has been factored into the estimated operating costs Unit Description Operating cost is about $1.00 per barrel light oil treating including electricity, ultrasonic parts replacement and catalysts Ultrasonic control system is advanced and can fit in one trailer with the processing line Processing capability is adjustable to smaller size or scalable to larger size

18 IUT: Critical Path to Success for Bunker Fuel

19 Conversion of fuel oil to meet 0.5%fuel regulation (example:0.79% RMK 500) Properties Unit Feed IUT product After treatment ISO 8217, 2012 RMK500 specs Viscosity at 50 C mm2/s(cst) unchanged 500(max) Density at 15 C Kg/m unchanged (max) CCAI Calcul 844 unchanged 870 Sulphur mass % (2020)(max) Flash Point C 105 unchanged 60 (min) Hydrogen sulfide mg/kg <0.4 unchanged 2.00(max) CCR mass% 14.9 unchanged 20.0(max) Acid number mg KOH/g 0.1 unchanged 2.5(max) Total sediment aged mass% 0.01 unchanged 0.10(max) Pour point C 6 unchanged 30(max) Water volume% 0.05 unchanged 0.50(max) Ash mass% unchanged 0.150(max) Vanadium mg/kg 19 unchanged 450(max) Sodium mg/kg 54 unchanged 100(max) Aluminum + Silicon mg/kg <15 unchanged 60(max)

20 HFO Simulated Distillation Before/After Processing(example for 1% sulphur RMK500) Similar quality liquid before and after, apparently

21 IUT Technology Timeline for Bunker Fuel *2020 Complete Successful Commercial Validation Trial for Light Oil Completed Tuning operation parameters for HFO Gantt Chart Reconfiguration/Commercial Unit Installation for HFO Sell 50 Units Sell 100 Units Sell 200 Units *By 2020, IUT expects that we will sell approximately 350 units, which represents an estimated 30% of the world total HFO bunker fuel market based on 300million MT per year world HFO consumption

22 Typical IUT Unit processing up to 6000 BPD

23 Thank you!