Oryxe Energy International, the Irvine maker of fuel additives that reduce toxic emissions, said Tuesday that it will build a manufacturing plant in Texas with Afton Chemical Corp.
Financial terms of the deal were not disclosed.
The plant will produce Oryxe's new diesel additive to be distributed in Texas later this year.
The deal is important because it gives Oryxe a boost in manufacturing its first product to market, called OR-LED, an additive for diesel fuel. The additive has been approved by the Texas Commission on Environmental Quality and produces a fuel that meets Texas' new diesel low-emission requirements that go into effect Oct. 1.
Oryxe, a privately held company founded in 2001, has signed two distributors for its additive. "These are small deals but we are in discussions with many others," said Kevin McGlensey, president of Oryxe. "We think we will have contracts of 30 to 40 percent of that low-emission diesel market by the end of July," he said.
The additive is mixed with diesel as it is being pumped into the delivery truck, so refiners don't have to retool their equipment to make the low-emission diesel.
"Texas has learned from California," McGlensey said. "In California, you had to produce a fuel that met the formulation." That gives the state what's known as a "boutique fuel" that is primarily made in California and only used in California. When refineries in California have operational problems that cut into production, especially during the summer, the cost of fuel rises because the state has few places to turn for its fuel.
Texas gave more options for compliance because many of the refineries in that state make fuel for other parts of the nation, McGlensey said. Texas told companies they could either follow a formulation, import the cleaner-burning diesel or allow for new technologies, such as additives.
McGlensey said Oryxe has been working with the California Air Resources Board and refiners in the Golden State to see if their additives can produce a more cost-effective diesel.
The company is also working on an additive for California gasoline. It could be on the market as soon as a year from now, McGlensey said. That could take some pressure off the delicate supply and demand issues here.
"With our protocol and additive, refineries could produce 5 to 8 percent more gasoline from the same barrel. ... Imagine if we can add 3 million gallons to the market and reduce the cost .... that would be significant."
Afton specializes in manufacturing fuel lubricants and additives. The plant in Pasadena, Texas, should be running by September.