Hydrodec Eyes Group III

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Transformer oil rerefiner Hydrodec plans to develop a pilot plant later this year focused on rerefining used paraffinic base stocks and potentially producing API Group II and III base oils.

Hydrodec collects used transformer oil and manufactures, markets and distributes transformer oil and naphthenic base oil at its facilities in Australia and in the United States in Ohio, with plans to expand to more facilities in Japan. The company has corporate offices in London.

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In December, Hydrodec announced proof of concept in its industrial research program by producing a Group II base oil sample from a wide range of used industrial oils. The company said that extension of the companys catalyst technology into paraffinic feedstock and products also gave it insight into how to use the technology to rerefine engine oils.

The test results are extremely encouraging and will support a move to full pilot plant and testing in 2013, Hydrodec CEO Ian Smale said in a report accompanying the companys year 2012 earnings release. He noted that the key competitive attributes of the technology in its current application in transformer oil – including high recovery rates, competitive operating costs and high quality products – remain viable in the new target markets.

Smale said the technology offers potential for new types of high quality base oils that meet or exceed higher-end specifications such as Group II, II+ and III.

Market intelligence suggests that the ability to produce a Group III product in particular would mark a significant breakthrough for rerefined products, he noted. We are confident that we can develop the process chemistry and reaction process, as well as process equipment design, manufacturing routes and process control philosophy that will be internationally protectable through patent. We are seeking grant funding to support this development, and are in discussions with potential partners for future feedstock and product development.

The company began commercial production at its transformer oil rerefinery in Canton, Ohio, in October 2008. The 22,000 square foot plant can recycle up to 8 million gallons per year. It uses a proprietary catalyst to remove impurities and produce a rerefined product the company describes as hydrogenation-refined naphthenic mineral transformer oil.

Globally, Hydrodec posted a $9.2 million operating loss and record full year revenue of $26.1 million for the year ending Dec. 31, 2012, compared to an $8 million operating loss and $22.4 million in revenue for full year 2011. Sales volume of its transformer oil and base oil grew 11 percent from 20.3 million liters in 2011 to 22.5 million liters for 2012. Hydrodec said its performance was impacted by volatile market conditions during the second half of 2012 as feedstock availability diminished during the summer and the third quarter but increased in the fourth quarter.