Aduro Clean Technologies’ (Nasdaq: ADUR) (CSE: ACT) is most widely known in investment circles for its potentially revolutionary approach to plastic recycling. The company’s Hydrochemolytic™ technology platform has demonstrated the ability to process a wide variety of plastic types with minimal sorting and cleaning, key characteristics in the search for a circular plastic economy. But Hydrochemolytic™ (HCT) is a true platform system that breaks down hydrocarbon chains and can be used for a number of petrochemical applications.
One of them is the upgrading of bitumen, an unusually heavy, viscous crude that cannot move in pipelines without either significant upgrading or dilution with lighter hydrocarbons. A corollary market is paraffinic oil, featuring wax components that require specialized heated storage, pipeline, transportation, and unloading technologies to make refining possible. Aduro is advancing in both markets in parallel with its plastic recycling commercialization initiatives.
Here we’ll take a closer look at the opportunity in crude oil upgrading and Aduro’s potential to make a significant impact in the vertical.
Bitumen/Heavy Oil Market
Canada is home to the fourth largest oil reserves in the world, and about 97% of those are bitumen from Alberta’s oil sands. Venezuela has the world’s largest oil reserves, almost all of which is very heavy crude. In both cases, technical extraction and processing requirements negatively impact the pricing of the end product. For example, bitumen in its raw state is better suited to uses like road and roofing materials than refineries, which is why producers either upgrade it into synthetic crude oil (SCO) or blend it with large volumes of condensate (diluent) to create dilbit, a diluted form of crude oil that can flow through pipelines.
Upgrading follows two basic paths: removing carbon via coking, which cracks bitumen into lighter products and leaves behind a solid coke, or adding hydrogen through hydroconversion/hydrocracking under high pressure over catalysts. Coking is simpler but lower yield; hydroconversion is more complex and capital‑intensive, but can produce SCO volumes equal to or greater than the bitumen feed. Both require high levels of capital expenditures and tend to produce significant amounts of greenhouse gases.
As of 2024, 38% of Alberta’s oil sands production consisted of upgraded SCO, while 62% was dilbit which is mostly exported to the United States for refining.
Dilbit is known as Western Canada Select (WCS) crude, and it trades at a discount of about US$13/barrel to West Texas Intermediate (WTI), a lighter and non-diluted crude. That figure used to be about $16/barrel prior to the 2024 activation of the Trans Mountain Expansion Pipeline. At current production levels that $3/barrel drop equates to an extra $4 billion of revenue.
Clearly, any technology that improves the transportability of bitumen and increases the efficiency of current upgrading technologies, even incrementally, could have a major impact on the economics of a very large industry sector. And this analysis only covers the Alberta oil sands, with the global heavy oil industry (including Venezuela) offering even more opportunity.
Paraffinic Crude Market
Paraffinic crude is a waxy oil that flows poorly when cool but yields high‑quality diesel, lube base oils, and other products. Though it is in high demand due to its superior lubricating qualities for industrial and automotive applications, and the diesel quality is very desirable, the market for paraffinic crude oil is constrained by the lack of refining capability. Refineries need unique equipment and delivery methods, including heated or insulated pipelines, heated storage tanks, specialized railcars, and steam‑equipped unloading machinery, to make the operation work.
In the United States, the Uinta Basin in northeast Utah hosts the majority of paraffinic crude. A study from a few years back defined the economics and realities of getting that oil refined in the US. The report identified 64 refineries (out of 132 total active refineries) across the country that could, technically, refine the waxy oil coming from the Basin. The vast majority of them are located in the Gulf Coast area, where lighter crude is abundantly available. Of the 64 potential candidates, only 8 of them actually had rail offload with steam at the refinery gate, a requirement for the processing of waxy crude. And the economics of all the added costs didn’t make sense, so the concept of a cross-country specialized pipeline/rail service did not get off the ground.
Paraffinic crude is not unique to the Uinta Basin, nor are the issues with transporting and refining it. A 2022 peer‑reviewed study estimates production of 16.4–27.1 million barrels per day of paraffin‑rich crude, corresponding to roughly 20–33% of global crude oil production. Africa, Asia, and former Soviet republics house significant waxy oil reserves. This is a huge market opportunity for a company capable of efficiently removing the wax so the crude can be refined without specialized equipment.
The Hydrochemolytic™ Solution
Aduro’s Hydrochemolyitc™ platform may be just the answer the industry is looking for. The system offers several advantages over current coking and hydroconversion approaches. The technology is highly scalable and significantly less expensive to build. It also operates at a lower temperature, with lower energy needs, while greatly reducing the need for dilutive hydrocarbon substances in the upgrading process. HCT processing also results in greatly reduced emissions, making the oil produced ‘greener’ than that created by conventional methods. It can even be applied to the lowest grade bitumen left over from these conventional methods in refineries, essentially turning waste into a much higher value and usable oil.
The upgraded crude has superior properties compared with the common Western Canadian Select variety of crude, including reduced values for density, viscosity, sulfur, metals, and acid number. Reduced viscosity means that little or no dilution by light hydrocarbons is required for pipeline transport. Compared with alternative upgrading technologies, the reduced emissions and low resource demands of HBU give environmental and competitive advantages to Albertan oil producers.
On the paraffinic side, Aduro recently announced that HCT has proven, in bench-scale testing, capable of upgrading paraffinic crude. Aduro tested Uinta Basin “yellow wax” and “black wax” feedstocks, demonstrating that HCT produced crude with reduced wax content that remained stable at ambient temperatures. This development, if scaled and applied, would mean that all of the specialized heating systems currently used to keep the wax from solidifying would be unnecessary. Aduro has filed a continuation-in-part patent application in the US to extend its intellectual property coverage to this new application.
Aduro’s Renewed Focus
HCT was first developed as a bitumen-upgrading solution. Over the last few years, Aduro has focused on the plastic recycling application as a faster way to commercialization. With that process nearing the commercial-scale pilot phase, the company appears to be turning some of its attention back to the crude oil business.
Aduro has joined the Utah Petroleum Association to develop relationships with and demonstrate its capabilities to the key players in the state’s extensive oil industry. The Association’s President Rikki Hrenko-Browning stated, “We’re pleased to welcome Aduro Clean Technologies to UPA. Innovation in how we move and process Utah’s waxy crudes has real implications for the competitiveness of our basin. We are excited for Aduro to explore pilot opportunities here in Utah.”
At the same time, Aduro announced the appointment of Scott Smith, M.A.Sc., P.Eng., as Program Director, Petroleum Technology Solutions. Smith will focus on applying HCT within paraffinic crude and bitumen upgrading, including defining potential technology integration approaches within existing operating sites while guiding pilot campaigns that support localised scale-up.
He is a 25+ year veteran of the oil industry, spending the last 17 years with Cenovus Energy. Cenovus is a Canadian-based integrated energy company that explores for, produces, refines, and markets crude oil, natural gas, and refined petroleum products. Headquartered in Calgary, it operates oil sands projects in Alberta, conventional assets in Western Canada, and offshore projects, along with upgrading and refining operations in Canada and the U.S.
Investor Takeaway
Aduro is a small tech innovator that spent years developing HCT in the lab and now in the field with its plastic recycling focus. The Canadian company listed on the Nasdaq in November 2024, and in the intervening 18 months the stock has appreciated about 213%. The value created to-date is almost exclusively driven by the advancement of its plastic recycling initiatives.
In its most recent corporate presentation, Aduro views the plastic recycling vertical as a projected $120 billion total addressable market by 2030. Meanwhile it estimates the heavy crude/bitumen business market in the neighborhood of $50 billion, a number which likely doesn’t include the paraffinic oil segment. Aduro is now moving forward in the industry that spawned HCT, and its market capitalization of about $480 million doesn’t even reflect that potential. Investors are encouraged to keep track of developments from Aduro in general, and particularly in the oil sector.
Author’s Disclosure: This article reflects the author’s independent analysis and personal views. The content is provided for informational purposes only and should not be considered financial or investment advice. Readers are encouraged to conduct their own independent research and due diligence before making any investment decisions.
