Syntroleum & Bluewater Form Joint Venture

Syntroleum Corporation has signed a letter of intent to form a joint venture with Bluewater Energy Services B.V., intended to develop and finance the building of the world's first air-based gas-to-liquids (GTL) plant on an offshore floating production storage and offloading (FPSO) vessel that could also produce oil and offer storage capabilities.

The purpose of the joint venture is to develop, construct, own and operate GTL/Oil FPSO vessels. The companies are working together to identify projects that will allow the joint venture to participate in the upstream development of oil and gas reserves and the downstream processing of those at offshore locations. A detailed feasibility study conducted by the companies has addressed a design of up to 17,000 barrels per day of Fischer-Tropsch (FT) products, 40,000 barrel per day of crude oil, and 10,000 barrels per day of condensate on a FPSO vessel, which would include around 2.3 million barrels of storage capacity. The GTL/Oil FPSO study follows Syntroleum's work with its GTL barge concept for shallow water.

The terms of the joint venture contemplate that both Bluewater and Syntroleum will contribute equity to the financing of the first vessel. Together, they are identifying equity partners to participate in development of this business model and the financing of the first GTL/Oil FPSO. "This is a significant step forward for both companies as we leverage our combined expertise, and Syntroleum's air-based GTL technology is seen as the key," said Jack Holmes, president and CEO of Syntroleum. "There are numerous offshore gas discoveries in the one-to-three trillion cubic foot range where we can add significant value using this FPSO technology."

By using this GTL/Oil FPSO technology concept, companies can develop offshore gas reserves that otherwise would be uneconomical and in the process avoid costs of reinjection of natural gas back into the reservoir. Both companies expect that engineering, design and construction costs will decrease for successive vessels, which has occurred with other new processing technologies as with liquefied natural gas. Furthermore, Syntroleum continues to make significant strides in advancing and improving its technology. In 2005, as a direct result of work at its Catoosa Demonstration Facility, Syntroleum was able to increase its single train capacity from 12,000 barrels per day to 17,000 barrels of ultra clean products per day. Recent experience at the plant indicates the company can achieve a rate of up to 25,000 barrels per day of GTL products in a single train.

"Continued operation of our facilities has allowed us to improve our technology and increase throughput efficiencies. This increased capacity is very important in any plant, but particularly for a ship-based design where deck space is limited," Holmes said.

Bluewater has been developing and operating FPSO vessels around the world since 1985. Its FPSO contracts include numerous projects that manage oil, water and gas separation; gas handling, water injection and power generation; as well as offshore storage, offloading and export tanker management. Bluewater also is a leader in the design of mooring systems for the safe transportation of produced oil and gas from the wellhead to production vessel, and from floating storage to export tankers.

"Bluewater is a leading designer, builder, owner and operator of FPSO vessels, which are used in the production and transportation of recovered oil and gas at some of the most challenging offshore locations in the world," said Bluewater President Hugo Heerema. "Bluewater is excited to participate in the development of ultra clean fuel for which we foresee worldwide strong demand."

Syntroleum and Bluewater expect this 50/50 joint venture to be the first step in forming an equity group to participate in the financing of offshore GTL production and storage projects. The formation of the joint venture is subject to negotiation and execution of definitive agreements.

Bluewater Energy Services B.V. is a member of the Bluewater Group of Companies that has built a technological lead specializing in lease and operation of tanker-based production and storage systems, and has become a leading provider of Single Point Mooring systems. Bluewater operates worldwide with offices in The Netherlands, United Kingdom, United States, Nigeria, Angola, South Africa, Singapore and China.

Syntroleum Corporation owns a proprietary GTL process for converting natural gas or synthesis gas derived from coal into synthetic liquid hydrocarbons. The company plans to use its technology, as well as other third party gas processing technologies, to develop and participate in gas and coal monetization projects in a number of global locations.