Less than a month after our previous update, Global Green Solutions (GGRN – $0.12) proudly announced that the construction of their Greensteam demonstration unit, at Aera Energy’s Belridge oilfield, is completed.
The Company reached this significant milestone below budget, ahead of schedule and without any safety incidents. This demonstrates Global Green’s capability to manage and safely execute projects with meticulously planning, discipline and processes.
The Demonstration Unit
In March 2008, Global Green Solutions signed an off-take agreement with Aera Energy, a Shell and ExxonMobil joint venture and one of California’s largest oil and gas producers, to replace 10 of Aera’s natural gas fired steam generators with Greensteam waste biomass fired steam generators.
Before commencing construction of the 10 full scale units, a ¼ scale demonstration unit had to be built to:
- Prove that steam can be generated economically and efficiently and;
- To measure the emissions in order to secure a air quality permit from the San Joaquin Valley Air Pollution Control District*.
* The San Joaquin Valley Air District is a public health agency whose mission is to improve the health and quality of life for all Valley residents through efficient, effective and entrepreneurial air quality management strategies.
Steam Production Tests
Although the exact process configuration and feedstock composition is unique to the Aera project, 95% of the equipment is industry-standard and is installed and operating in multiple reference sites. Additionally, Global Green’s Chief Engineer has designed and installed hundreds of similar steam generators.
In prototype testing, Greensteam reached NOx emissions as low as 0.040 lbs per MMBTU**, while other biomass combustors in the San Joaquin Valley region have been permitted at levels as high as 0.075 – 0.100 lbs per MMBTU.
** MMBTU represents one million BTU (British thermal unit). It’s approximately the amount of energy needed to heat one pound of water one degree Fahrenheit. One BTU is equal to about 1.06 kilojoules. The 80 MMBTU produced by a single unit every hour is enough to heat an average U.S. home for a whole year.
Aera Off-Take Agreement
Greensteam has an off-take agreement with Aera Energy to sell steam on a take-or-pay basis. The generated steam will be sold at a price which is correlated to the prevailing price of natural gas, benefiting Greensteam when natural gas prices rise. Pay back on the project occurs at a natural gas price of $3.59/MMBTU, while natural gas futures prices for delivery in September 2011, when the first commercial unit is scheduled to come on line, is trading at $5.45/MMBTU.
Feedstock Supply Agreement
Greensteam is in negotiation with key feedstock suppliers to deliver waste biomass at a rate that is linked to the steam price that Greensteam receives from Aera. So, if the steam price declines, the cost of feedstock also declines.
The feedstock requirement is easily met by available resources as Aera Energy is located in California’s Central Valley, one of the most productive agricultural areas in the US. Half of the country’s fruits and nuts are grown in the Central Valley. And farmers have little alternative than to contract biomass removal to local chipper and grinder companies, because recent legislation prohibits open-burning of agricultural waste.
Financing The Full Scale Units
Global Green’s management team is currently holding off raising the money to construct the 10 full scale units until the successful testing is accomplished. This is a good idea, because it reduces the risk for investors, which gives Global Green a much stronger position at the negotiation table.
The demonstration project is now entering the testing phase to prove Greensteam’s capability to economically and efficiently generate oilfield quality steam with ultra-low air emissions. Performance testing requirements as specified by Aera, and air emissions testing requirements as specified by the San Joaquin Valley Air Pollution Control District are scheduled to be complete by the end of the year.
In a previous update we calculated that the Aera agreement is very lucrative for Greensteam as annual revenues can easily exceed $30 million.
If you don’t own any shares of Global Green Solutions yet, we advice to buy some at these dirt cheap prices and gradually increase your position as more milestones are reached.
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