http://umedholdings.com/news/18-20110610-uta-fw-co-build-natural-gas-fuel-converter

2011/06/10: UTA, FW co. build natural gas fuel converter

Dallas Business Journal – by Matt Joyce, Staff Writer
Date: Friday, June 10, 2011

A fledgling Fort Worth energy company and the University of Texas at Arlington have plans for a new natural gas-to-liquid conversion process they say could change the global energy landscape.

UT-Arlington recently announced a licensing agreement with 1st Resource Group Inc. to commercialize the converter. 1st Resource Group aims to begin selling the portable converters within a year, said President and CEO Douglas McKinnon.

The standard converter unit would be capable of producing up to 500 barrels a day of the synthetic diesel jet-fuel mix. McKinnon wouldn't say how much the end product would cost, but said it would be cheaper than a barrel of crude oil.

The project could have broad implications, backers say, including new markets for the natural gas industry, cheaper sources of diesel and jet fuel for uses like trucking companies and airlines and a reduction in the nation's dependence on foreign oil for transportation fuel.

“It will offer the opportunity for natural gas companies to drill more wells,” said Gary Fewell, chief operations officer for 1st Resource Group. “They're sitting on tons of acreage, and there's no reason for them to drill right now. There's a glut on the market.”

Potential natural gas sources for the conversion units could be stranded gas, flared gas from landfills or plants and vented gas, 1st Resources Group said.

High fuel prices have been a major concern for the nation's airline and shipping industries.

Fort Worth-based American Airlines (NYSE: AMR) generally supports the advancement of technologies related to alternative fuels, said Andrea Huguely, a spokewoman for the airline. Huguely did not comment specifically on the UT-Arlington and 1st Resource Group project.

Some of the principals of 1st Resource Group approached UT-Arlington to sponsor research into gas-to-liquid conversion a couple of years ago.

When it proved successful, UT-Arlington licensed the technology to 1st Resource Group to commercialize the process, said Ron Elsenbaumer, the university's vice president for research and federal relations. Neither party would release details of the sponsorship, the licensing agreement or the royalty payments the university will receive if the converters make money.

1st Resource Group will own and operate the units, which will cost $22.5 million each, Fewell said. The company has contracted an engineering firm to work on the design, installation and oversight of the units. Fewell would not identify the company.

Fewell said 1st Resource Group will use local machine shops and fabricators to assemble the components of the converters. Each converter will require a full-time staff of 14 people to handle maintenance and other jobs on side, he said.

UMED Holdings Inc., a Fort Worth-based public company that trades on the pink sheets under the symbol UMED.PK, is financing the commercialization of the converter. Ric Halden, UMED's president, said project developers have met with “large oil and gas exploration companies” to join them in developing the conversion units. He wouldn't disclose the companies.

“We hope to build a thousand units in the next couple of years,” Halden said. “It will be an ongoing process, and we'll have to take on some partners.”

UT-Arlington's conversion process is a variation on a process that's been around for nearly a hundred years. Fred MacDonnell, associate chair of chemistry and biochemistry, said the challenge was developing a process that could be done on a smaller and cheaper scale.

“What we discovered and what we worked on patenting was that you could get a very nice product distribution – predominantly a jet and diesel mixture – when you do the process the way we're doing it,” MacDonnell said.