Floating Production, Storage & Offloading BioCoal Unit

Tschudi Bio Company (TBC) has together with Damen Shipyard in Holland and Glommen Technology (GT) in Elverum developed a conceptual design for a Forest FPSO (Floating Production Storage and Offloading). TBC has also obtained an exclusive right (on certain conditions) to commercialize GT?s method to extract sugar from the hemicellulose in wood. This technology is patented in Russia, USA and patent pending in EU. The objective is to build a factory based on this technology onboard a barge or a vessel and thereby get access to raw material or stranded assets that cannot be processed in an economical way today. A Forest FPSO will in theory be able to position itself where the raw material is cheapest and the currency most attractive. The Russian boreal forest is the largest in the world. The opening of the Northern Sea Route Combined with new Russian Arctic seaports makes northern Russia especially interesting for the Forest FPSO concept as it secures access to cheap raw material and it secures competitive freight of the finished products to markets in the Far East and the western hemisphere. The raw material cost is the most significant cost variable and represent about 60% of the total production cost. In addition to the sugar (wood molasses) that comes out of the process, the remaining washed out wood pulp can be used to produce black energy pellets or as a substrate (growth medium) as a substitute for peat. In today?s Scandinavian market (price for raw material and finished products) the sugar extraction technology will double the net-worth of the by-products in a sawmill. Using this production process in the Arctic part of Russia where the price of the raw material is substantially less than in Scandinavia, will multiply the value creation. TBC has together with our partners from Northern Research Institute of Forestry (NRIF) in Arkhangelsk and Green Wood in St. Petersburg managed to get a good understanding of the raw material situation in the European part of Russian Arctic (Murmansk, Nenets and Karelia). We have obtained a more comprehensive understanding of prices and volumes available in Arkhangelsk region (Mezensky, Primorskiy and Onega District). Establishment of new wood processing industry, like a Forest FPSO, could be construed as a potential competitor for the same raw material by the existing industry. Low quality wood with little or no industrial usage is, according to our partners in NRIF, a non-utilized resource in the Arctic and will not be construed as competition. We have, together with GT, sufficient evidence through physical test of waste wood done at the pilot plant in Elverum confirmation that this low quality wood can be used in our process to produce wood molasses, substrate and black energy pellets. In the beginning of March, we had meetings with representatives from NRIF in Arkhangelsk where we agreed to prepare a feasibility study for TBC to analyze this resource base, if it is accessible in sufficient quantities and if it can be transported to port in in a cost efficient way. The study is expected to be ready by the end of June and according to NRIF it will be published in ?Forest Journal? in Arkhangelsk within the end of the year. The cooperation with NRIF and Green Wood has been very good. TBC has through this cooperation established a good picture of Russian forestry in general, with special focus on sustainability, governance and certification for international trade of biomass. Through the Center for High North Logistics we have been constantly informed about the development of the Northern Sea Route and the new modern ports being built in Russian Arctic, first and foremost the Sabetta port at the Yamal peninsular. TBC has followed up on the findings that emanated from the workshop that CHNL arranged in Murmansk in November 2018. The market for energy pellets in Japan and South Korea is increasing steadily. Most of this import comes from west coast of the US and Canada. Sabetta has an equal sailing distance to these markets in the Far East and can therefore offer competitive freight in the summer season when the Northern Sea Route is open. Arkhangelsk is well positioned for the western market. US sanctions has unfortunately deteriorated some of this part of the NORRUSS study. Preliminary conclusion of the NORRUSS project is that location of a Forest FPSO in the area close to Arkhangelsk is feasible when it comes to ice, draft and quays-facilities. The vessel will have to be on Russian flag and double bare-boat registration can be arranged through the port captain in Arkhangelsk. Access to raw material in the form of low quality wood (waste wood) is available in sufficient volume without any negative consequences from existing producers. Today?s price of raw material and today?s ruble rate combined with attractive selling prices in the international market, makes a Forest FPSO investment in this area profitable.

Through our Russian partners we managed to get a good picture of the raw material situation in the European part of Russian Arctic like Murmansk, Nenets and Karelia. In particular, we have managed to get a good overview of the volume and prices available in the Arkhangelsk region of Mezensky, Primorskiy and Onega. We have concluded that the best resource base in this area is waste-wood as this resource is of no interest to the existing industry and hence not considered a threat to their current business. We have also attained satisfactory assurance that Russian forestry is very well organized with rules and regulations that are in accordance with international standards for sustainability certification. On March 19th 2019, the Patent Office of the Russian Federation (ROSPATENT) issued a decision to grant a patent for the technology. TBC has made an exclusive agreement for Russia with the patent owner and the inventor to use this technology to extract sugar from the hemicellulose.

Wood pellet plants can convert biomass into pellets, which will be used for heat and electricity production. Annual worldwide production is around 25 million tons in 2014. Russia stand for less than 10% of this production despite the fact that they have the largest resource base in the world. Most of this production consist of white pellets that are non-hydrophobic and requires covered logistics solution as humidity will destroy the product and can create auto ignition. Tschudi Biocoal AS has a license for using third generation production process, developed and patented by Zilkha Biomass Fuels LLC, Houston Texas for production of black pellets or Biocoal. These pellets are hydrophobic and can withstand exactly the same logistics handling as regular coal and they are not self-igniting. Sixty percent of the production cost for pellets, both white and black, relates to the cost of the raw material. Pellets trade, being international, is like all other internationally traded commodities also subject to currency fluctuation. To mitigate the risk or to take advantage of the possibilities that fluctuations in raw material cost and currency can create, Tschudi Biocoal has developed a conceptual FPSO Biocoal Unit (Floating Production, Storage and Offloading) based on solid Norwegian maritime experience from the oil and gas sector as well as the fishing industry. The objective of this project is to analyze the potential for placing of such units inside or at the estuary of the Russian rivers running out in the Arctic. This is a low developed area with a substantial supply base of raw material. The estuary of Yenisei and Ob/Irtysh is only 8 days sailing from Rotterdam while the main import of wood pellets is coming from the US Gulf some 16 days away. The opening up of the Northern Sea Route, not only by decreasing ice but also because of better icebreaker service and new deep-water ports, should make this area competitive for biomass production.