5 Questions with Kurt Sorschak of Xebec Adsorption (TSX:XBC)
Amid all the talk of “peak oil” no one ever seems to talk about “peak gas”. That’s because new technologies have recently uncovered vast new reserves. Kurt Sorschak, President and CEO of Xebec Adsorption (TSX:XBC)believes that natural gas as a “greener” transportation fuel is a logical next step. Xebec’s (which recently merged with QuestAir Technologies) adsorption technology is used to remove impurities from natural gas, hydrogen and other gases. We sat down with Kurt Sorschak for “5 Questions” from our readers.
1. (From Bryan in Glasgow) You recently completed a merger with QuestAir.
How do you hope this will benefit Xebec?
KS: The Questair merger allows us to move into the biogas upgrading market which offers
very attractive growth opportunities in the near term. Through the merger, Xebec
gained strong R&D and product development capabilities, while Questair benefited
from Xebec’s strong manufacturing and sales background.
2. (From Andrew in Vancouver) We hear a lot of talk about “peak oil”. What
about natural gas? Do you think all the new gas found with Shale plays has
pushed it back?
KS: The Shale gas finds have definitely changed the supply picture for natural gas.
Since the Carter administration, policy makers and oil companies have been telling
us that natural gas will be depleted within 10 to 15 years in North America.
Therefore, policy decision favoured other energy sources, such as coal. Today this
perception is definitely changing. People are starting to realize that natural gas
is a a secure, abundant, cleaner and domestic resource which will be used as a
primary energy source going forward. I do not think we are near peak gas.
3. (From Laurie in Ottawa) It seems Xebec is poised to benefit from a wave
of legislation, such a the US renewable fuel standard and cap and trade
measures. How dependent is Xebec upon this legislative push of late?
KS: As with most renewable energy companies Xebec is dependent on legislation for its
renewable energy solutions. The US is certainly going to be a key market for
Xebec, however it is important to note that legislation for renewable energy is a
global activity and is and has been rolling out over the past 10 years. For
example, in the UK biomethane to grid is planned to emerge in 2010/11. In
anticipation, Xebec has opened an office in the UK this summer which is led by two
senior executives with intimate knowledge about the UK market. The Chinese/Asian
markets are moving towards renewable and low carbon legistlation, consequently the
former CEO of Questair has relocated to Shanghai, this will allow us to capture the
opportunities in the Chinese/Asian market.
In general renewable energy solutions cannot yet compete with conventional and
established energy sources. Most established energy solutions are priced at a
subsidized, i.e. lower than true total cost, since they do not take into account
costs like securing shipping lanes by deploying U.S. navy ships, stabilizing and
supporting countries, mainly in the Middle East (Iraq, Afghanistan, Saudi Arabia)
through military deployment and health cost associated with harmful emissions from
diesel, gasoline and coal. If we as a society belief in a sustainable future, we
either must support our transition efforts and/or price our legacy energy sources at
the true price.
4. (From Chris in Kamloops) Xebec has moved back and forth recently
between profitable and unprofitable quarters. What will it take for you to post a
KS: For capital equipment manufactures with smaller volumes and relatively short
delivery cycles of 8 to 12 weeks, it is very difficult to smooth quarterly revenue
streams, since we are very dependent on stable and continuous order inflows. Most
capital equipment manufactures are impacted by overall economic cycles and the
general health of the economy. Xebec currently is in this group of companies which
is impacted by short term demand swings and general economic trends. As we start
deploying our larger and complete renewable energy systems, we are moving into
delivery cycles of 6 to 12 months. This consequently requires a much larger order
backlog which in turn will allow us to stabilize quarterly results through better
5. (From Kevin in San Francisco) You just signed deals with two big
Chinese companies, Sinopec and CNPC for compressed natural gas fueling
stations in China. Everyone covets the Chinese market for its size. Do you
see a larger portion of Xebec’s revenue coming from China in the years to
KS: Indeed, China and Asia in general offer excellent growth opportunities for renewable
and alternative energy companies in the years to come. We see significant profitable
growth for our Chinese subsidiary over the next decade. China is already moving
towards natural gas as a prime energy source for power generation and
transportation. In addition China already has a biogas market of US$ 1.7 billion in
2009, one of the largest, if not the largest market in the world.