Phoenix “Replacement Energy” Programs — 2013/2014 Outlook

The U.S. Department of Energy has just estimated that the world’s use of energy — primarily for transportation and generation of electricity — will expand by at least 55% by 2040 — with half that growth coming from conventional fossil fuels (coal, oil, and natural gas) which will still account for 80% of worldwide consumption.

Conventional fossil fuels are expected to increase carbon dioxide emissions by over 40% by 2040. Nuclear power is also expected to double by 2040, though the recent dramatic nuclear plant disaster in Japan has indirectly resulted in the closure of five older facilities in California, Florida and Wisconsin due to escalating operating and capital costs. In summary, we see an astonishing decline in nuclear reactor expansion plans despite Government loan guarantees and related incentives.

Continually expanding Government subsidies granted to the alternative and renewable energy sectors have not yet proven their economic viability. World oil demand is now closing in on 90-million barrels per day — a hard number. Each increasingly rare billion barrel oil discovery thereby replaces less than 12 days of current world oil consumption! We feel that the Phoenix proprietary “Replacements” — low cost hydrogen-from-water — and “Synfuel” from carbon dioxide compounding with hydrogen, both from many sources — have to be considered true “Replacement Energies” for the world’s energy-needy future.

It’s clear that the energy industry urgently needs to develop more than 50-million barrels per day of new oil production capability — equal to four new Saudi Arabias — to offset the accelerating decline in proven, producible reserves. Call the pending status “Peak Oil” — or employ any other definition — but for years, the world has been discovering only about 50% of current consumption. The irrefutable “hard” numbers suggest that the world’s 175-year old hydrocarbon “honeymoon” is winding down.

As recently suggested by of one of Europe’s largest oil companies — more than $25-TRILLION must be spent on energy sector investments over the next 20 years to meet the anticipated 40% increase in demand (“think” China and India) — and to replace aging infrastructure, all without any guarantees of success. The conclusions are obvious — despite the “climate change doomsayers,” the world will continue to need massive new reserves of conventional liquid fuels for transport (surface, air and water), for heating and cooling, and for the manufacturing and processing of goods, materials, foods and our myriad lifestyle essentials.

Conservative analyses of the broadly studied alternative and renewable energy universe brings the Phoenix “Replacement Energy” initiative into special, unique focus. The most highly promoted and comparably subsidized alternatives and renewables in the “new energy” universe — covering solar, wind, biofuels (including ethanol), algae, and including the more obvious conventional coal and nuclear options — cannot answer the clear and undisputed essential demands on reserves.

Phoenix maintains exclusive ownership of its proprietary “Synfuel” technology, having filed for U.S. and international provisional patents covering the innovative compounding of hydrogen with diverse captured carbon emissions. The “Synfuel” hydrogen and carbon components both derive from widely diverse sources. The “Synfuel” equivalents of conventional liquid transportation fuels, ranging from light-end jet fuel and kerosene, to mid-range gasoline, and heavy-end diesel oil products, can all employ the long-established (and long paid for) liquid fuel distribution infrastructure with the massive investments already in place for uninterrupted commercial operations. “Synfuel” technology will also play a critical central role in advancing economic Carbon Capture and Storage/Sequestration (CCS) systems — to be further upgraded by the environmentally benign Phoenix Carbon Capture and Recycling (CCR) strategy.

Phoenix suggests that the increasingly publicized development of large scale shale gas and oil reserves is highly over-rated. By definition, shale is a tight source rock — with minimal porosity and permeability — inherently limiting economically producible hydrocarbon reserves. Hydraulic fracturing (or “fracking”) of the tight shale rock logically does not increase the aggregate of its in-place oil and gas reserves. Drastic and precipitous production decline curves are a virtual certainty in the not too distant future. Shale wells, requiring lengthy horizontal drilling legs, are very high cost (with long term payouts, increased by substantial front-end lease and post-end disposal costs).

Phoenix has been awarded a Canadian Government Collaborative Grant to advance our “Synfuel” research project — “Efficient Catalytic Systems for Reverse Water Gas Shift (RWGS) Reactions Based on Nano Structured Nickel Catalysts” — by the Natural Sciences and Engineering Research Council of Canada (NSERC). The program will focus on the electrochemical design and promotion of novel catalytic reactions to be employed in the application of diverse metals, alloys and composites for special energy system catalysts and fuel cells.

The new grant will fund the development of our Low Carbon Hydrocarbon Fuel (LCHF), or “Synfuel,” a proprietary, innovative synthetic hydrocarbon fuel that can be compounded from diverse economic sources of hydrogen and carbon. “Synfuel” is chemically identical to the full range of conventional petroleum-based liquid fuels. The funding is to advance research on the conversion of carbon dioxide to carbon monoxide and water. Our proprietary flowsheets are designed for commercial “Synfuel” production and employ the generated carbon monoxide for compounding with hydrogen.

A brief overview of other current energy, fuel and power alternatives is useful:
• Wind and Solar Power:
Wind and solar power alternatives are complicated by unpredictable, intermittent and directionally-variable atmospheric conditions, with inherent environmental noise downsides that severely limit optimum locations. Cost-intensive standby power and storage are essential. 400% increases in tariffs from those for conventional energy are required.
• Biofuels (including Ethanol):
Edible crop sources (largely corn) of biofuels consume essential food commodities that can lead to disastrous food price inflation. Increasing costs of biomass waste inputs, fertilizers, planting, harvesting, storage, processing, transport and infrastructure are certain.
• Algae:
Algae’s sensitivity to temperatures, and nutritional needs for their cultivation, ensures that its batch (not continuous) production system is an inherently costly energy alternative.
• Nuclear:
The substantial costs and dangers of routine nuclear power generation must also include the essential provision of spent nuclear fuel disposal sites that must be secured for upwards of 1,000 years!

Phoenix must develop its hydrogen energy initiative — and employ this virtually inexhaustible, pollution-free, power resource to generate low cost, sustainable, clean energy — while emitting, upon combustion, only pure water vapor. Virtually eliminated are the escalating costs and dangers of the wide range of noxious emissions of carbon dioxide, sulphur dioxide, nitrous oxide, and other greenhouse gases.

Copies of all Company releases may be further referenced on the regulatory filings website — www. SEDAR.com — and on the corporate website — www.phoenix-pco.com.

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