Texaco Inc. plans to buy 50 percent of a process developed by Dynalectron Corp., a Northern Virginia firm, that upgrades high-sulfur crude oil as well as tar sands and shale extracts to a full range of environmentally acceptable petroleum products.
The decision by Texaco, announced here yesterday, represents the first significant commercial endorsement of the Dynalectron process in recent years and carries with it Texaco's agreement to join the McLean company in the licensing and marketing of the technology worldwide.
Trading in Dynalectron stock was halted on the American Stock Exchange after the Texaco announcement. After order imbalances were corrected, Dynalectron trading resumed, and the stock closed down 50 cents for the day at $14.37 1/2. The stock was the third-most-active on the Amex, with 134,800 shares changing hands and analysts stating they had little information on which to make an assessment of the Texaco deal's impact.Texaco was off 37 1/2 cents on the New York Stock Exchange to $45.62 1/2, also in active trading.
Because of rising crude oil prices, there is growing attention to such sources of oil as bitumen from Canadian tar sands and the vast reserves of heavy oils found in the Western Hemisphere. Tapping these resources has been avoided in the past, because of the high costs involved in conversion to oil that could produce gasoline, for example.
The cost differential is narrowing, however, and officials at Dynalectron to import crude oil to North America.
Texaco Development Corp., a subsidiary of the nation's third-largest petroleum company, ultimately will have a half interest in the Dynalectron process, under the agreement in principle announced yesterday. In addition, Texaco will install a conversion processing unit at its Convent, La., refinery.
Officials of the companies declined yesterday to discuss financial details of the agreement or Dynalectron's investment in the process. Annual revenues of the company division involved were about $13 million in 1979.
The process is called "H-oil," developed by a Dynalectron subsidiary, Hydrocarbon Research Inc. Through hydrogen conversion, desulfurization and demetalization, upgraded oil can be processed from high-sulfur crude, residual oil and the shale or tar-sand extracts.
An initial commercial installation of H-oil at Lake Charles, La., more than 10 years ago was followed by plants in Kuwait and Mexico. The Kuwait refinery processed 13.8 million barrels of crude in one year with the process.
In 1977, the technology was selected by a group of five Illinois utilities' for an entirely different process -- a proposed coal-to-pipeline-quality-gas demonstration. An H-oil unit would be used to upgrade the liquid byproduct.
A Dynalectron executive, Senior Vice President Earl Holdgraf, said yesterday that Texaco's decision is "expected to contribute significantly to the continuing development and commercialization of the H-oil process." He said Dynalectron and Texaco also would coordinate research programs in support of the technology.
The H-oil process is different than another Dynalectron technology, H-coal, which is being used to convert a wide range of coals to low-sulfur fuel oil or to premium-grade crude oil. A 600-ton-per-day H-coal demonstration plant now is being tested at Catlettsburg, Ky.