Genoil Inc. www.genoil.net INTRODUCTION & OVERVIEW MARKET - - PowerPoint PPT Presentation

Genoil Inc. www.genoil.net

INTRODUCTION & OVERVIEW

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• Decreasing supply of light, sweet (low sulphur content) crude and

increasing supply of heavy, sour (high sulphur content) oil.

• Refinery system worldwide built around light, sweet oil.
• Increasing global oil demand growth (particularly in Asia) driving

substantial investment in heavy sour reserve development and production volumes:

– Large scale heavy sour oil reserves in Middle East, Russia, Latin America – Less significant reserves in China and Asia

• Tighter environmental regulations for desirable oil grades and

sulfur content.

• Industry need for low cost highly efficient solutions to growing

volumes of heavy sour production runs.

MARKET OVERVIEW

• Two most popular technologies for converting heavy crude into

light oil

• Coking – removing carbon molecules from heavy oil
• 20% of product is converted to low-value carbon coke
• Requires high temperature and pressure to convert the oil
• Low desulphurization
• Hydrotreating / Hydroconversion / Hydrocracking – adding hydrogen

molecules to heavy oil

• Produces a higher conversion rate because molecules are being added, not

removed as in coking.

• Requires relatively low temperatures and pressures
• High desulphurization

HEAVY-TO-LIGHT CONVERSION TECHNOLOGY

• Genoil’s technologies represent breakthrough and innovative approaches to

existing oil and gas production or refinery problems. Genoil’s solutions can be readily integrated into conventional systems to increase productivity, at moderate capital and operating costs, thereby providing a rapid payback. Genoil currently

• wns numerous technologies and intellectual property that are protected under

patents or patents pending. Genoil’s primary technology is the Hydroconversion Upgrader (GHUTM).

• The GHUTM is a proprietary upgrading process that converts low margin heavy

crude oils, that are typically sold as ashphalt or heating oil, into ligther low sulfur crude oil that can be sold as gasoline and jet fuel. In addition to dramatically increasing the profitability, thru producing more barrels of useable oil, the Genoil process dramatically reduces the sulfur, metals, nitrogen, asphaltenes and heavy residuum of the crude oil.

• Genoil’s patented hydrogenation process converts heavy oil fractions into lighter

fractions, resulting in a 15-20% greater output of light oil from refineries and significant cost savings, while helping a refiner meet worldwide government mandates for low sulfur and ultra-low sulfur diesel fuels that are needed to protect the environment. With global refineries running at capacity, together with finite world oil supplies the GHUTM technology could be one of the most valuable innovations of the century.

INTRODUCTION TO GENOIL AND GHU

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COMPETING TECHNOLOGIES AND THE GHU’S ADVANTAGES

GHU (Hydrogen Addition) Competing Hydroconversion Technologies Delayed Coking (Carbon Rejection) Residue Conversion Up to 90% 65%-75% 70-85% Temperatures Low/Medium Medium High Volume Output 100-104% 100-104% 75-80% Coke production 0% 0% 20-25% Desulfurization (1) >90% >90% 37% Hydrotreating Process includes hydrotreating Process includes hydrotreating Needs further hydrotreating Capital Cost $ 7,000 – 12,000 per barrel $ 9,000 – 17,000 per barrel $ 8,000 – 14,000 per barrel Equipment Fewer Processes Fewer Processes More Processes Water usage 15-20% less than Coking or Air Cooled 15-20% less than Coking or Air Cooled Natural gas usage Optional or None Optional or None Yes IRR (2) 28% Unknown 18%

(1) Source: The American Oil & Gas Reporter, January 2006 / Genoil test results (2) Source: The American Oil & Gas Reporter, January 2006

• Applications

– Downstream – GHU unit installed in refineries, converts low-value atmospheric and vacuum bottoms (residual product from refining process) into high value, light oil which can be further refined into high value consumer oil products, increasing production by as much as 15-20%. – Upstream – GHU unit operated at oil producing fields, increasing value of the product, as well as, converting heavy oil so that it meets specifications of oil pipelines, without using the current expensive and wasteful process of adding diesel fuel to heavy oil to meet viscosity requirements for piping oil.

• Advantages

– GHU operates at lower temperatures and pressures than competing Hydroconversion technologies, which translates to lower capital and operating costs. – The GHU produces higher conversion rates of the residual bottoms than competing technologies, and therefore a better return on investment. – Lower Licensing and/or Royalty fees than competing technologies

GENOIL HYDROCONVERSION UPGRADER (GHU) - TECHNOLOGY PROFILE

DOWNSTREAM MARKET

GROWING DEMAND FOR RESIDUAL REFINING MARKET

Demands for high quality transportation fuels continue to rise, requiring additional crude processing or investments in residual upgrading

Global Consumption, Transportation Sector

• Refiners continue to search for ways to increase output capabilities and profitability:

INCREASING DEMAND FOR LOW-SULFUR CRUDE

Environmental regulations

• f sulfur content in

Gas Oil

2,000 ppm 500 ppm 50 ppm 10 ppm 1992 1997 2005 2007

Source: EIA – Energy Information Administration

• Refining capacity worldwide not able to process heavy sour oil.
• High sulphur crude can severely damage refineries built to handle sweet, light

crude:

• Sweet refineries would require substantial and expensive equipment upgrades

to handle high sulphur crude

• Need to meet WTI standards for crude imports to refineries.
• Sour crude sells at a relative discount to sweet crude:
• WTI (API 39º, Sulfur 0.3%) = $ 60.85
• Lloyd Blend (API 22º, Sulfur 2.2%) = $ 40.39 (Dec 29, 06)

• Heat is used to separate

(vaporize) the different crude components (fractions) according to weight and boiling points in a distillation tower.

• Heaviest fractions with the

highest boiling points and highest concentration of contaminants settle at the bottom of the tower: – Sulfur, Nitrogen – Asphaltenes – Metals

• The heaviest fractions are

called residuals – the bottom of the barrel.

Source: Energy Information Administration (EIA) Simplified Drawing of Separation

SEPARATION – HEAVY ON THE BOTTOM, LIGHT ON TOP

• Refiners face tremendous pressures to maintain profits, while:

Residual, low- value fuel supplies continue to increase as demand for residual fuels continues to decline

Refinery Crude Runs For Selected Market Source: Purvin & Gertz Inc. Regional Upgrading Report

GROWING NECESSITY FOR RESIDUAL REFINING MARKET

• Genoil’s hydroconversion upgrader can be utilized in refineries to:

– Increase light oil production by 15-20 % (volume output) – Meet growing demand for low sulphur, light fuels – Increase the value of the oil – Increase refining profit margins – Desulfurize oil over 90% to help refiners to comply with 2006 environmental regulations – Increase buying power and profitability by allowing refineries to buy a cheaper, heavy crude

• il, while maintaining a light product slate
• Genoil’s global refinery market opportunities:

– 13 million barrels per day of residual heavy oil can be converted into light oil for making gasoline, diesel and jet fuel – Increasing flowage of heavy API feedstocks

• Bottom of the barrel management is increasingly important to maintaining refinery

viability and desire to enhance feedstock yields will drive adoption of Genoil’s Hydroconversion technology

DOWNSTREAM REFINERY MARKET

UPSTREAM MARKET

• Production of heavy crude continue to increase:

3 Diminishing supply of light sweet crudes is forcing development of heavier sour crudes throughout the world

Refinery Crude Runs For Selected Markets Source: Purvin & Gertz Inc. Regional Upgrading Report

GROWING NECESSITY FOR REFINING CAPABILITIES OF HEAVY, SOUR OIL

• Genoil’s hydroconversion upgrader can be utilized in heavy oil fields to:

– Upgrade the oil to meet pipeline specifications (viscosity, sulfur) – Desulfurize the oil to above 90% – Decrease oil production and transportation costs: no need for expensive diluents

• ften added to heavy oil in order to move them to the pipeline

– Increase the value of the oil

• Genoil’s hydroprocessing technology market for upstream heavy crudes

estimated in 9 million bpd

– Increasing as more of oil discovered becomes heavy. – Markets include heavy oil producers in countries such as Venezuela, Russia, Middle East, China, as well as the Canadian tar sands

UPSTREAM UPGRADER MARKET

FINANCIAL ASSUMPTIONS & BUSINESS MODELS

RISK ASSESMENT

• Technology Risk: Minor

– Performance guarantee by Genoil, with optional conversion to the Genoil conventional upgrading technology

• by and on the expense of Genoil.

– Proven technology with a functioning and scalable Pilot Plant and negotiations on the way for several full scale projects world wide. – Favorable tests and studies by independent 3rd. Parties, Potential Investors, and Potential Clients.

• Commodity Risk: Minor / None

– Collapse of crude oil & energy prices is unlikely and may be hedged. – Spread between heavy sour crude and light sweet crude is narrowing slower when crude oil prices fall, and widening faster when crude oil prices rise. – When crude oil prices fall, the spread actually rises between heavy sour crude and distillates (diesel, jet fuel, etc.) – as the spread between distillates and light sweet crude widens more, where the spread between light sweet crude and heavy sour crude narrows less. – Regulation and emission rules around the world getting very restrictive, which will lead towards extinction of the market for residual fuels and collapse the price and spread between residual fuels and light sweet crude

• il.
• Country Risk: Minor (Emerging Markets) / None (developed Countries)

– Stable and lower risk in emerging countries than ever historically. – Risk further mitigated by the stable energy sector and high demand for the energy and oil markets.

• Sector Risk: None
• Currency Risk: Minor / None

– Input, especially output and capital costs all or mostly in US$ or hard currencies.

• Corporate Risk (Refinery or Producer): Minor

– Assuming a stable entity with proven refining or producing capacity, as a base for a GHU and economics of the business model.

RESIDUE & HVGO UPGRADING IN A REFINERY WITH GHU RESIDUE Genoil GHU

9% Naphtha 22% Kerosene 48% Diesel 21% VGO

1,250 BPD Reside Feed Upgraded and increased to 1,443 BPD Product Refined: 327.0 BPD Naphtha $ 157.00 = $ 59,339 264.0 BPD Kerosene $ 105.00 = $ 27,720 618.0 BPD Diesel $ 105.00 = $ 64,890 234.0 BPD VGO + $ 30.00 = $ 7,020 Recoverable Product Dollars = $ 150,696

Refinery income after upgrade and recycle of HVGO / Residue by $ 150,969 Dollars Per Day vs. $ 37,500 Dollars Per Barrel sold as FCC Feed or an increase of $ 113,469 Dollars Per day in income

Genoil GHU Upgrading Facility

Per day Net Sales

SALES CRUDE UPGRADED IN GHU UPGRADING FACILITY 100,000 BPD CAPACITY WITH SEPARATE CONDENSATE SALES

50,000 BPD Condensate

50,000 x $ 57.00 per barrel Can be used a Chemical Feed Stock vs. used for Mixed Export Blend

$ 2,850,000 100,000 BPD Heavy Crude $ 5,200,000 100,000 BPD Upgraded Crude

100,000 x $ 52.00 per barrel

Total Net Sales $ 8,050,000 Less Operating $ 850,000 Sales Less Expenses $ 7,200,000 Total Net Gain Per Day $ 1,800,000

Difference between Mixed Crude Sales and Upgraded Crude sales based on 100,000 BPD Operating Expenses Less Operating Cost 4.00 per barrel $ 400,000 Less Cost of Capital 2.50 per barrel $ 250,000 Less Hydrogen Cost 2.00 per barrel $ 200,000 Total daily cost $ 850,000

GHU RESIDUE UPGRADING MODEL - DOWNSTREAM

(BASED ON A TYPICAL MID-SIZE REFINERY AND AVERAGE DATA ASSUMPTIONS)

% ANNUAL RETURN ON CAPITAL

49%

Refining Capacity

Barrels per day Barrels per year

Refinery Capacity 30,000 10,500,000 Residue Feed Input 4,500 1,575,000 Residue Upgrade Output 4,050 1,417,500

GHU CAPITAL COST

$ Per Barrel a Day $ Per Project % of Capital Cost

Capital Expenditures (Equipment Only)

• $8,000
• $36,000,000
• 73%

Initial, Eng, Construct & Install Expenditures

• $2,000
• $9,000,000
• 18%

GHU Licensing Fees

• $1,000
• $4,500,000
• 9%

Total GHU Capital Cost

• $11,000
• $49,500,000
• 100%

EXPENSES

$ Per Barrel $ Per Capacity Daily $ Per Capacity Annual

Residue Feed / M380 $30.0

• $135,000
• $47,250,000

Estimate Operating Expenses $8.5

• $38,250
• $13,387,500

Total Expenses $38.5

• $173,250
• $60,637,500

REVENUE

$ Per Barrel $ Per Capacity Daily $ Per Capacity Annual

Residue Upgrade / WTI $60.0 $270,000 $94,500,000 % Input Output Volume Ratio Adjustment $60.0

• $27,000
• $9,450,000

Total Revenue $60.0 $243,000 $85,050,000

EARNINGS

$ Per Barrel $ Per Capacity Daily $ Per Capacity Annual

Revenue - Expenses $21.5 $69,750 $24,412,500 Operating Days per year = 350 % Residue Feed of the Refining Process = 15% % Input Output Volume Ratio = 90% Crack Spread / WTI - M380 = $30.0 GHU Refinery Lifetime = 18 years

GHU RESIDUE UPGRADING MODEL – DOWNSTREAM

(BASED ON A TYPICAL MID-SIZE REFINERY AND AVERAGE DATA ASSUMPTIONS)

• Capital Investment =

$49,500,000 Return on Capital (from development phase) = 4 Years / 16 Quarters Return on Capital (from operational phase) = 2 years / 8 Quarters $ Annual Return = $24,412,500 % Annual Return on Capital Investments = 49% $ Lifetime Return (18 years) = $390,600,000 % Lifetime Return (18 years) on Capital Investments = 789%

4 YEAR PROJECTED CASH FLOW (Break Even Analysis)

$60,000,000 $40,000,000 $20,000,000 $0 $20,000,000 $40,000,000 $60,000,000 Q0 Y1 Q1 Y1 Q2 Y1 Q3 Y1 Q4 Y1 Q1 Y2 Q2 Y2 Q3 Y2 Q4 Y2 Q1 Y3 Q2 Y3 Q3 Y3 Q4 Y3 Q1 Y4 Q2 Y4 Q3 Y4 Q4 Y4 GHU Cap Cost Capital Cost Cum Earnings Return

GHU HEAVY OIL UPGRADING MODEL – UPSTREAM/DOWNSTREAM

(BASED ON A TYPICAL MID-SIZE OIL PRODUCER OR REFINERY AND AVERAGE DATA ASSUMPTIONS)

% ANNUAL RETURN ON CAPITAL

42%

Producing Capacity

Barrels per day Barrels per year

Heavy Sour Oil Producing Capacity 30,000 10,500,000 Light Sweet Oil Output 30,900 10,815,000

GHU CAPITAL COST

$ Per Barrel a Day $ Per Project % of Capital Cost

Capital Expenditures (Equipment Only)

• $8,000
• $240,000,000
• 73%

Initial, Eng, Construct & Install Expenditures

• $2,000
• $60,000,000
• 18%

GHU Licensing Fees

• $1,000
• $30,000,000
• 9%

Total GHU Capital Cost

• $11,000
• $330,000,000
• 100%

EXPENSES

$ Per Barrel $ Per Capacity Daily $ Per Capacity Annual

Heavy Sour Oil / Lloyd Blend (API 22º, Sulfur 2.2%) $40.0

• $1,200,000
• $420,000,000

Estimate Operating Expenses $8.5

• $255,000
• $89,250,000

Total Expenses $48.5

• $1,455,000
• $509,250,000

REVENUE

$ Per Barrel $ Per Capacity Daily $ Per Capacity Annual

Heavy Sour Oil Upgrade / WTI (API 39º, Sulfur 0.3%) $60.0 $1,800,000 $630,000,000 % Input Output Volume Ratio Adjustment $60.0 $54,000 $18,900,000 Total Revenue $60.0 $1,854,000 $648,900,000

EARNINGS

$ Per Barrel $ Per Capacity Daily $ Per Capacity Annual

Revenue - Expenses $11.5 $399,000 $139,650,000 Operating Days per year = 350 % Input Output Volume Ratio = 103% Crack Spread / WTI - Lloyd Blend = $20.0 GHU Refinery Lifetime = 18 years

• Capital Investment =

$330,000,000 Return on Capital (from development phase) = 5 Years 1 Quarter / 21 Quarters Return on Capital (from operational phase) = 2 years 1 Quarter / 9 Quarters $ Annual Return = $139,650,000 % Annual Return on Capital Investments = 42% $ Lifetime Return (18 years) = $2,094,750,000 % Lifetime Return (18 years) on Capital Investments = 635%

GHU HEAVY OIL UPGRADING MODEL – UPSTREAM/DOWNSTREAM

(BASED ON A TYPICAL MID-SIZE OIL PRODUCER OR REFINERY AND AVERAGE DATA ASSUMPTIONS)

5 1/4 YEAR PROJECTED CASH FLOW (Break Even Analysis)

$400,000,000 $300,000,000 $200,000,000 $100,000,000 $0 $100,000,000 $200,000,000 $300,000,000 $400,000,000 Q0 Y1 Q1 Y1 Q2 Y1 Q3 Y1 Q4 Y1 Q1 Y2 Q2 Y2 Q3 Y2 Q4 Y2 Q1 Y3 Q2 Y3 Q3 Y3 Q4 Y3 Q1 Y4 Q2 Y4 Q3 Y4 Q4 Y4 Q1 Y5 Q2 Y5 Q3 Y5 Q4 Y5 Q1 Y6 GHU Cap Cost Capital Cost Cum Earnings Return

APPENDIX:

• Articles and additional

information

– Genoil in Energy Magazine – 2006 Tech Trends – Upgrading Heavy Oil Products

The statements made by representatives of Genoil Inc. ("Genoil") during the course of this presentation that are not historical facts are forward-looking

• statements. Although Genoil believes that the assumptions underlying these

statements are reasonable, investors are cautioned that such forward-looking statements are inherently uncertain and necessarily involve risks that may affect Genoil’s business prospects and performance causing actual results to differ from those discussed during the presentation. Such risks and uncertainties include by way of example and not of limitation, general business and economic conditions, decreases in demand for oil, natural gas and natural gas liquids, changes in our operating conditions and costs, changes in costs relating to differing quantities and qualities of petroleum products, the effectiveness of our technology, financing concerns and changes in the legislative or regulatory environment. Genoil undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information or future events. FORWARD LOOKING INFORMATION

THANK YOU FOR YOUR ATTENTION

Contact: David K. Lifschultz Chairman & Chief Executive Officer Genoil Inc. 2833 Broadmoor Blvd., Suite 120 Sherwood Park, Alberta, T8H 2H3, Canada Tel: (914) 393-5800 Fax: (914) 373-3823 E-mail: dklifschultz@genoil.net