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Q&A: Velocys believes CIS deal will be a door-opener

Velocys, formerly Oxford Catalysts, owns technology that powers small scale gas to liquids plants. It recently announced a commercial deal to sell a reactor to an unnamed customer in the Commonwealth of Independent States (CIS).

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Velocys (LON:VLS), formerly Oxford Catalysts, owns technology that powers small scale gas to liquids plants. It recently announced a commercial deal to sell a reactor to an unnamed customer in the Commonwealth of Independent States (CIS). 
Proactive Investors (PI) recently spoke to Dr Neville Hargreaves, the company’s Business Development director.

PI: First, how significant is this latest deal?

Hargreaves: I think its significance lies in the enormous potential of the market in Russia and the other CIS countries, for gas to liquids. There's an enormous amount of stranded gas there. There's also a significant flaring problem in many parts of the region. So, we've always felt that that market was pretty important to us, and it's great to get a real sale into it.

PI: But this, itself, is actually quite small, isn't it? Because I think revenue is - what - just US$2mln a year. Is that right?

Hargreaves: That's the right order of magnitude, yes. So, it's a starting point, really. It's pretty small in terms of the commercial plants we expect to be selling in the future. It's only a single reactor, but although, obviously, we welcome the revenue, the greatest significance, I think, is that we're recognised as having the solution to some of the big problems in that industry, in that market.

PI: Well, let's take a look at this, because as you say, you've got this technology to build what many regard as relatively low cost plants, to generate synthetic liquids from natural gas, which is widely expected to be a big turning point for investors, as you just alluded to. How far away are you from this significant point?

Hargreaves: Well, it's always a hard question to answer, which is why I'm smiling, but I really do think we're very close. We have a number of projects that have gone through a significant amount of engineering, due diligence, understanding project development, and it's the final investment decision. You only know when you've got there, but I do think that getting what we call a full commercial multi-reactor plant will happen soon.

PI: So, 2014 could, potentially, be very exciting for investors. Just outline the strategy.

Hargreaves: I think, really, we need just to keep doing what we're doing. We're very confident that smaller scale gas to liquids will happen soon in North America, in the CIS, and elsewhere. It's just a question of exactly when those points of inflection occur. So, I think we carry on working with those customers we're working with. We're attracting new people in all the time, and make sure we're there to deliver when we're required.

Quick facts: Velocys Plc

Price: 6 GBX

AIM:VLS
Market: AIM
Market Cap: £63.83 m
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