Oxford Catalysts is Starting to concentrate on the money

Oxford Catalysts has a number of intellectual property rights that seem ripe for commercialisation. First is a catalyst that can remove sulphur from petrochemicals, second is a catalyst that can generate hydrogen from methanol at room temperature, third a catalyst that transforms methane to the building blocks of liquid fuel and last, and certainly not least, a catalyst that can convert methanol and hydrogen peroxide into superheated steam, instantly. Even, at a glance, all four of these catalysts appear to have far reaching commercial applications. The trick, as ever, lies in taking the concept from the laboratory to the factory and developing commercial applications.

Not surprisingly, Oxford Catalysts (OCG) still spends quite heavily on research and development, though Roy Lipski, Chief Executive Officer of OCG, told Proactive that the spend is now more focused on the "D" than the "R". Labour costs are top heavy, too, with four executive directors, three non-executive directors, three professors on a scientific advisory panel and a range of highly qualified business development directors. Despite the overheads, OCG is cashed up, raising £15 million in April 2006 at 174 pence per share, and a further £4 million in July 2007 through a placing with Pioneer Investments at 124 pence. As of June 30^th2007, OCG has £12.4 million in the bank, so in the near term cash shouldn't be an issue. In fact, Roy Lipski is confident that the company has several years' worth of cash reserves, which begs the question," why did it raise £4 million in July?" The answer: the board of OCP wants to focus on development of the catalysts without being distracted by the continued need to raise funds. To date, private investors on the register of OCG are practically non-existent; the major shareholders include Oxford University, IP Group plc, New Star Asset Management, Credit Suisse, Lansdowne Partners, Pioneer Investments, plus the founders and directors of the company. So now the chart of OCG is starting to make more sense. The company came to the market with a range of catalysts which have the potential to be commercially viable, but with a few shareholders controlling most of the stock, the shares have drifted on limited news flow and low liquidity. This may be about to change.

As I write this article, OCG has announced its first really substantial press release of the last six months. The company has signed a memorandum of understanding with a "Global Consumer Goods Giant" to explore the use of OCG's instant superheated steam technology. Instant Steam is a pretty cool concept. Steam is used in hundreds, if not thousands, of applications around the globe. It is a powerful disinfectant, turns turbines in power plants and cooks food. Imagine a product that could produce steam without the need for electricity - the mind boggles. This isn't the first deal OCG has announced either: the company already has a development programme with Proventec Plc, to develop a machine for steam-cleaning floors, carpets etc, in hospitals and other premises that have strict hygiene protocols. The process of generating steam is surprisingly cheap and simple. Methanol and Hydrogen Peroxide are mixed and then react in the presence of the company's catalyst, to produce steam and a small amount of carbon dioxide. There are no nasty by-products, and the all of the ingredients required to make the chemical reaction happen are abundant and low cost. The steam cleaning equipment appears to be just the tip of the iceberg, however. Investors will have to wait for more details following this week's update, but we can't help but notice that steam kills MRSA (the super bug causing problems in the NHS) and generating steam from a clean chemical reaction, rather than from burning fossil fuels, has to be of interest to many people.

The same concept can also be used to produce hydrogen using a different catalyst. Hydrogen is the fuel that is supposed to replace hydrocarbons in the future, and several fuel cell companies' futures depend on someone coming up with a technological breakthrough to produce hydrogen in a simple, cost effective way.

OCG's other main thrust at the moment is carbide (metal-carbon) catalysts. OCG claims its carbide catalysts have the potential to be a direct substitution for catalysts, using 40% less metal than comparables: think "expensive platinum, rhodium and iridium" here. There are two markets that OCG is targeting with carbide catalysts: the first is hydro-desulphurisation (HDS) which is the process of removing sulphur from fuel. Oil refineries, power plants and petrochemical plants all have an issue with sulphur. There are strict regulations in place across the developed world regarding the emission of sulphur as, once emitted, it reacts with moisture in the air to make sulphuric rain, or "acid rain"' as it is more commonly called. Acid rain, in turn, can damage flora and fauna, buildings and alter the pH of water. Accordingly, oil consumers are obliged to reduce the amount of sulphur they put into the air. However, the products they use are increasingly produced from heavy oils, which contain more sulphur than light sweet oils. OCG already has its proprietary catalyst with end users who are testing it. Ideally, OCG would want to sign a licence agreement with a supplier, who would gain exclusive use of its technologies and would pay a royalty on sales. The second area that that OCG is targeting with for its carbide catalysts is the gas/coal/biomass to liquid markets that use Fischer-Tropsch (FT) technology. OCG claim its catalysts offer some of the best performance characteristics for FT catalysts, but at a lower cost. There are a number of sub-sectors within this area, but one thing that OCG is keen to point out is the little published fact that 5.5% of all gas is flared as a by product of oil production, and that gas was worth some US$40 billion in 2006. Finding a cheaper way to capture this stranded gas, and convert it into a liquid that can be shipped to a market, has obvious commercial potential. Fischer-Tropsch processes can also be used to create diesel from biomass, which has attracted renewed interest following of EU regulations on penalising the disposal of biomass waste into landfills

The global market for HDS catalysts is already estimated to be greater than US$1 billion per annum and is expected to grow as refineries are increasingly obliged to process more heavy oils, meanwhile the overall market for all energy and environmental catalysts is expected to continue to grow to US$13 billion by 2009. OCG has an intriguing mix of routes to revenues with several brilliant catalytic technologies, at varying stages of development and targeting different markets - including some very established markets. Lets hope OCG is catalysed, or at least galvanised, by the prospect of commercial success, the avowed change of emphasis from "more research" to "more development" sounds like the right kind of idea, and the company seems to talking with the right kind of people.