Highlighting and Supporting Startup Energy Technology
by Dwight Rychel, P.E., Petroleum Technology Transfer Council
Excerpts in PTTC Network News, 4th Quarter 2005

Supporting Early Stage Technology Ventures and Technology Transfer
The Rice Alliance for Technology and Entrepreneurship was founded in 1999 and is Rice University's flagship initiative devoted to the support of technology entrepreneurship. The mission of the Rice Alliance is to support the creation of technology-based companies and the commercialization of new technologies in the Houston and Southwest Region through education, collaboration and research. The Rice Alliance has assisted in the launch of over 150 new technologies, raising more than $300 million in early-stage funding. The Rice Alliance mentors early-stage technology companies, provides educational programs, coordinates a business plan competition, and hosts a variety of Technology Venture Forums in such areas as Information Technology, Nanotechnology, Life Sciences and Energy. The papers described below were presented at the third such forum on energy.

The Rice Alliance and the Petroleum Technology Transfer Council have overlapping missions, that being an endpoint where a good idea is nurtured, the means to bring it to a commercial product encouraged, the business plan executed, and new technology put into the hands of customers to make their businesses thrive, benefiting the technology company and their investors, the customers and the public. While the PTTC focuses more in moving new, but proven technologies into the hands of the customer (producers) to

improve the way they search for and produce hydrocarbons, the Rice Alliance focuses earlier in the product life cycle to ensure that the good idea is given the resources to become commercial. However, the Rice Alliance is broader in scope, considering technologies in a number of fields other than energy. That said, it's also narrower in scope in that it is focused on technology providers in the Southeastern Region and smaller startup companies that lack the resources that the mainstream larger companies enjoy. While all energy topics are considered, from petroleum exploration to fuel cells and power generation, the Houston focus tends to tilt the mix toward Exploration and Production. And while the geographic focus may seem narrow, it encompasses a large segment of the petroleum industry.

The Rice Alliance Energy Venture Forum is dedicated to the "best of the best." Six new startup technology companies are featured each year along with research organizations. The candidate companies to be featured in the forum are screened on a number of rigorous criteria:

• Viability of the company - ability to generate revenues and profit
• Proprietary technology - strength of the technology and problem solved
• Competitive advantage and ability to sustain that advantage
• Size of the market and potential revenue stream
• Strength of the management team
• Proof of concept from bench testing or field trials
• A sound marketing and business plan
• Attractiveness of the company from an investors perspective

Focus Model: 3-D Visualization

Focus is now prepared to go forward with commercial implementation. The initial target is the carbonate reefs of the 2,100 square mile Central Basin Platform in West Texas and Southeastern New Mexico. According to the Texas University Bureau of Economic Geology, the reef system originally had 12 billion barrels in place, with 3 billion recoverable from wells drilled to date. The remaining "addressable oil" is estimated at 5 billion barrels. Initially, Focus seeks to trade their services for a carried working interest and back-in. The average target is estimated at 375,000 barrels/well and Focus hopes to participate in 40 wells. In Phase II, expected to begin in 2007, Focus plans to take a full working interest in an additional 60 wells. Worldwide reef targets are large and plentiful, including onshore and offshore fields in the Middle East, West Texas and New Mexico, Michigan, Western Canada, Indonesia, Africa and Australia.

Jaeco Technology, Inc. of Houston was formed in 2002. They develop, license and sell simple and compact process solutions for offshore operations based on their proprietary and patented technologies. The focus for these technologies is currently offshore drilling and production, but the potential for applications onshore and in other industries is substantial.

The primary technology currently being successfully marketed to the offshore operators is the TEKTOTE^TM Solution. It is a premixed and packaged 4-, 6-, or 8-barrel container of concentrated cross-linked polymers used to control fluid loss in the perforated interval of the reservoir. It utilizes compressed air to drive a pipeline pig to extrude the viscous material out of the container. The customer is credited for any unused material. Pre-blending eliminates problems for the operator in pumping viscous gel materials, as well as problems with blending on-site or container disposal. Jaeco has recently ramped their fleet to 20 rental units and intends to grow the business by expanding from the Gulf of Mexico to Brazil, West Africa and Norway. Additional growth opportunity exists in expanding their product line to larger 100- or 150-barrel containers and applying a similar strategy to the delivery of concentrated hydraulic fracturing gels.

The most recent technology developed by Jaeco is in the area of compact processing equipment: reactors, distillation, absorption, stripping and dehydration. The initial focus will be proving up the technology in the application of offshore seawater deoxygenation for reinjection back into the reservoir for pressure maintenance. The RAPTER^TM Solution will be capable of processing 100,000 barrels/day of seawater, with an outlet of 15 parts per billion of oxygen, all at a small fraction of the size of existing modules. The RAPTER^TM is a mass transfer exchanger reactor that contacts gas and liquid together. It generates a huge liquid surface area with micron-sized gas bubbles. It is scalable and motion insensitive. Due to its compact size, it will reduce operators' capital expenses as well as operating expenses. The initial niche to prove and establish the technology is the offshore water processing market, but ultimately the technology can be adapted to the larger markets of evaporation, stripping,

RAPTER^TM Mass Transfer Exchanger Reactor

absorption, dehydration, distillation, and chemical reaction in oil and gas, petrochemical, wastewater and other industries. Jaeco has recently received the patents for this technology and is in the process of fabricating a larger prototype process module. They are seeking an industry partner for field trials, funding to accelerate the development and marketing, and distribution channels.

Houston-based Ultima Labs, Inc. was founded in 2002 by the four principals, formerly of Innova Electronics (www.ultimalabs.com). Ultima is an engineering firm with expertise in sonic, electrical and nuclear magnetic resonance (NMR) logging for wireline, logging while drilling (LWD), measurement while drilling (MWD) and industrial applications. Their products and services include MWD sensor products, MWD board products, industrial control products and custom engineering services. Chief among those is the Compact Propagation Resistivity CPR^TM tool. LWD was introduced to the drilling industry in the 1980s and has been dominated by the large service providers. It has the advantage of "geosteering" in deviated wells, but has traditionally been expensive and produced poorer quality data than a wireline. The Ultima tool is designed to overcome these drawbacks. It will be considerably more affordable to the drillers and produce data with quality equal to the wireline data. It was launched in the 3rd quarter of 2002 and the first 6.75-in. low resistivity field test was in the 3rd quarter of 2004. An order for the development of a 4.75-in. tool was received in the 3rd quarter of 2003 and delivered a year later. And as an illustration of the common mission of Rice Alliance and PTTC, Ultima was awarded a DOE Microhole project (DE-FC26-05NT15487 "Microhole Coiled Tubing Bottomhole Assemblies") for the development of a 3 1/8-in. MWD/LWD collar and is featured on the PTTC website www.microtech.thepttc.org/ultima_labs/ultima_labs.htm#top. This product should be commercial in early 2007. Ultima asserts that the large service companies have done a good job of growing the LWD market, 500 to 1,000 sets globally. They view their market as the smaller service companies and project a market potential of 100 to 200 resistivity collars with annual rental revenues in the $14 to $28 million range.

Ultima Labs Integrated MWD/LWD Measurement System

WOW Energies, based in Houston and established in 2004, offers energy efficiency and pollution reduction technologies. The company owns the patented technology called the Cascading Closed Loop Cycle (CCLC), a breakthrough in energy efficiency that generates electricity from nearly any heat source (www.wowtechnologies.com). It is an advanced technology that converts heat at low and high temperatures  to electrical power using a patented heat exchanger and turbine/generator arrangement. Other technologies and services include: (1) the Super CCLC, which uses steam and condensate to supplementary heat the working fluid, (2) the Final Flue Gas Cleanup System, which creates a single system to remove multiple pollutants in low temperature flue gas streams, and (3) engineering services that require a multidisciplinary approach to look at energy efficiency and pollution reduction possibilities. Assuming that the technology is applicable to 20% of the waste heat energy market, the market potential is enormous, on the order of 160 GigaWatts. Industries that could apply this technology include gas pipelines, metals and chemicals, pulp and paper, power plants and renewable sources.

Franklin Fuel Cells of Malvern, Pennsylvania was founded in November 2001 (www.franklinfuelcells.com). Their mission is "to accelerate fuel cell commercialization by developing and producing a unique solid oxide fuel cell technology which is capable of operating directly on today's hydrocarbon fuels." The problem this technology addresses is that current fuel cell technologies need pure hydrogen or need to reform current fuels. The technology is currently in Phase II, Proof of Commercial Viability with initial product revenues expected in 2008. The Phase I Proof of Concept suggests that this fuel cell will compete with internal combustion engines, being twice as efficient and competitive in cost per horsepower. Early applications are expected to be in auxiliary power units for trucks and recreational vehicles and distributed generation, then expanding into the traditional internal combustion transportation market. The potential applications in the oil and gas industry include remote power for offshore applications and in-situ oil shale and heavy oil heating.

The final featured company was 10 Charge, Inc. of Dallas. Their proprietary technology was initially developed in 2001 in Europe. The technology was purchased and brought to the U.S. in 2004. The primary technology is the development of smart, fast battery chargers that deliver the optimal charge for a given battery's unique and dynamic conditions. It is capable of performing as a multi-chemistry charger across a range of previously incompatible battery sizes and types, reducing charge time by up to 90%, and extending the life of the battery by 200% or more. The initial market will be for use with power tools and consumer electronics, then eventually into industrial markets. The product recently completed testing of the first commercially-designed product.

In addition to the six featured technologies and companies, two of last year's featured firms were invited to provide an update on their products and progress. The first was TerraVici Drilling Solutions, of Houston (www.terravici.com). TerraVici is a technology development firm that provides low-cost drilling and completion tools to the oil and gas industry. Their first product is a full 3-D, low-cost, point-the-bit rotary steerable system (RSS) that is designed to outperform most rotary steerable systems on drilling performance at a fraction of the price. The X2 Rotary Steerable System® will be ready for commercial use in 2006. At 15 feet long, the X2 is half as long as the conventional rotary steerable tool configuration, providing savings in capital and operating expenses. The enabling technology is a novel control mechanism, adapted from the automotive industry, that reduces control costs by a factor of 10 without sacrificing performance. The lower cost of the tool will substantially expand the RSS market to include the smaller directional drilling and operating companies.

The other company providing an update from the previous forum was Oxane Materials, Inc. (www.oxanematerials.com), a Rice University nanotechnology spinoff. Oxane is exploring two innovations, alumoxanes and ferroxanes to enable the development of next generation fuel cell membranes, catalyst supports, coatings, adsorbents, and other high-value products.

Technology of the Future
Vikram Rao of Halliburton Company, the invited keynote speaker, addressed "Technology to Counter Oil and Gas Shortages (Real or Perceived)." Halliburton is bullish on future oil and gas supply. Rao began with a quote from Cambridge Energy Research Associates (CERA), "a large unprecedented buildup of oil supply in the next few years.....relieve the current pressure on supply and demand." Rao structured his comments by examining the resource for future oil and natural gas in the short-, medium-, and long-term future and the technologies that will be required to produce those hydrocarbons.

Looking at oil, the short-term supplies will require higher recovery rates of conventional oil and the exploitation of increasingly mature fields. The medium term will bring in more heavy oil, recovered both cold (7 - 20 degrees API) and with thermal assist (7 to 12 degrees API). In the long term, the mining of bitumen will grow from the traditional onshore, to offshore resources. The commercial technologies on the leading edge today are being directed at the conventional resources and mature field. For heavy oil, technology improvements will be needed in lifting (increasing mobility downhole, chemically and thermally) and transportation, decreasing viscosity and partial upgrades in the field. Possible technology for recovery of offshore bitumen would include applying heat downhole or in-situ retorting.

In the short term, unconventional gas supplies, tight gas, coalbed methane, and shales, will continue to grow in the supply mix. In the medium term, coal gasification and asphaltene gasification will come into play. In the longer term, gas hydrates and in-situ coal gasification will enter the supply. The technologies that will be required to economically extract that gas are in the early R&D stages.

Where is Today's Research?
A number of research institutions in the Gulf are engaged in energy and energy-related research, not the least of which are Rice and the University of Houston. Forum participants heard details from four ongoing projects. Topics ranged from produced water issues to EOR surfactants and alkaline/surfactants processes to fuel cell advances. Beyond the universities, there is also the non-profit Houston Advanced Research Center (HARC) (www.harc.edu). HARC functions as a non-partisan "Boundary Organization" between the research organizations and commercialization in technology and between the universities and governments and public sector for policy issues.

Learn more about the Rice Alliance for Technology and Entrepreneurship through their website (www.alliance.rice.edu). Read about past and upcoming events and success stories, sign up for the newsletter, even become a member, or become a sponsor.