Rentech, Dresser Will Form Exclusive Gas-to-Liquids Alliance and Exchange Shares

Rentech, Inc. (Denver, CO) and Dresser Engineering Co. (Tulsa, OK), a subsidiary of Dresser Engineers and Constructors, Inc., have signed an agreement in principle. Under it, Dresser receives exclusive rights to use Rentech's gas-to-liquids (GTL) technology in the natural gas-based GTL plants it designs. The companies will also exchange shares of stock.

Rentech GTL plants upgrade natural gas into synthesis gas, which they convert to soft wax and a mixed diesel-naphtha stream. Distilling the latter could yield mineral spirits, white oil, chemical feedstocks, diesel fuel, kerosene, and jet fuel.

The plants are particularly promising for capturing stranded gas in outlying oil fields. Producers in modest-sized fields without access to gas pipelines or local gas users ordinarily flare natural gas because they have no economical way to capture its economic value. GTL plants promise an inexpensive way to convert gas into easily transportable liquids.

The deal gives Rentech credibility and accessibility. Dresser, an old- line gas industry insider, has ties with gas producers going back to 1926. A full-service engineering company, it provides everything a company needs to add GTL technology to a site. For its part, Dresser receives early access to one of the field's most promising technologies.

"Dresser Engineering has been studying the rapidly emerging GTL field directly and on behalf of certain clients for at least the last three years," explains Dresser Engineering chairman/CEO William Morris.

"Dresser Engineering is impressed with Rentech's technology and patent estate, 18 years of Fischer-Tropsch experience and pilot plant results, and its undervalued share price. The alliance with Rentech will enable both companies to better compete in this arena of growing strategic interest to every major oil and gas company."

Medium Fields
The companies intend to pursue small to medium-sized projects -- 500 to 20,000 bbl/d of GTL products. While they could chose to go after larger businesses, both companies believe that medium-sized projects represent a substantial portion of the near term GTL market. Rentech's process also has good economics for medium-sized fields.

Under the agreement, Dresser will receive exclusive rights to provide process engineering, detail engineering, and design of GTL systems incorporating Rentech GTL technology. Excluded from the agreement are Rentech's previous deals with Texaco Natural Gas, Inc., and certain rights previously granted in the country of India.

Dresser Engineering will receive exclusive rights to Rentech's gas-to- liquids (GTL) process, pictured above. Dresser, a full-service firm that has served the natural gas industry since 1926, will make the process more accessible for a broad range of users.

Dresser is also negotiating a worldwide master license that will cover Rentech GTL technology when 100% natural gas is the syngas feed. Master licenses allow their owners to sublicense other companies.

Rentech's gas-to-liquids process uses syngas feedstock in its proprietary slurry Fischer-Tropsch reactor. The system uses an inexpensive iron-based powder catalyst suspended in molten wax slurry in a vertical synthesis reactor. Synthesis gas bubbles up through the slurry, contacting the catalyst and forming straight-chain hydrocarbons. Larger hydrocarbons exit as liquid heavy waxes while shorter molecules emerge from the top of the reactor as vapors, which are condensed into soft wax, diesel fuel, and naphtha.

Rentech's pilot plant.

The waxes can be thermocracked or hydrocracked to yield naphtha and diesel, or vacuum separated into a variety of wax products. Distillation of the combined diesel-naphtha stream produces such useful products as mineral spirits, white oil, kerosene, and jet fuel. Rentech either recycles or burns (as fuel) any uncondensed hydrocarbons.

Stock Ownership
The two companies will also exchange minority stock ownership in a tax-free exchange of shares. Dresser Engineers and Constructors, Inc. will acquire 7.5% of Rentech common stock. Rentech will receive 5% of privately-held Dresser.

"The Dresser Engineering/Rentech relationship provides a natural next step in the commercial deployment of the technology," says Rentech president/CEO Dennis L. Yakobson. "Dresser Engineering's reputation and experience as an engineering, procurement and construction firm will provide our customers with the type of service, experience and confidence necessary to help bring our GTL technology to its fullest potential."

Dresser has provided engineering, procurement, and construction services for natural gas facilities dating back to 1926. Its horizons extend from gas gathering and processing, NGL recovery, fractionation, and compression through refinery and process plant upgrades and revamps. Its Dresser Engineering subsidiary recently opened a GTL office in Houston, TX.

For more information: Rentech, Inc., 1331 17th St., Ste. 720, Denver, CO 80202. Phone: 303-298-8008. Fax: 303-298-8010.

Or: Dresser Engineering Co., 3700 Buffalo Speedway, Ste. 800, Houston, TX 77098. Phone: 713-629-4111. Fax: 713-629-4115.

By Alan S. Brown