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09. 11. 2012, Dow Jones Venture wire

As Oil and Gas LPs Seek New Tech, Chrysalix Backs Water Company Axine

by Yuliya Chernova

As its limited partners in the oil and gas industry are dealing with clogged equipment and lower oil production because of contaminated water, Chrysalix Energy Venture Capital is investing in a promising water-treatment technology company.

Axine Water Technologies Inc. has raised a multimillion-dollar round led by Chrysalix, with participation from the Business Development Bank of Canada ‘s venture arm.

RA lot of our limited partners are oil and gas players…So we are very sensitive to those technology innovations that can treat the newer issues” in that industry, said James Wells, an associate at Chrysalix who’s joining the board of Vancouver, B.C.-based Axine.

Chrysalix counts such companies as Total SA , Kuwaiti Petroleum Corp., Royal Dutch Shell and Delta Lloyd Private Equity among its limited partners. The investment in Axine came out of Chrysalix’s latest fund, which hasn’t closed yet.

Axine’s technology will have a primary application in the oil sands industry, rather than in the extraction of gas through hydrofracking, Mr. Wells said.Royal Dutch Shell, for example, is active in extracting oil from oil or tar sands in Alberta.

About 1.6 million barrels of oil a day last year were produced in Canada out of the deposits of clay, water, sand and bitumen, which is a heavy thick black oil, according to the Canadian Association of Petroleum Producers . Daily production will double by 2020, the association expects. Both the extraction of oil from these deposits and their refining into crude requires large water and energy resources. About 3.1 barrels of water was required per production of each barrel of oil in oil sands in Canada in 2010, according to the association. There are also concerns about the wastewater created through the process.

For Axine, partnering with big customers is also vital to create a large-scale water-treatment technology company, Mr. Wells said. RThe water sector is extremely fragmented, R he said. “The approach we’ve taken is you get really disruptively low-cost technology with no-brainer economics, and you get that wow factor when you first pitch this, with a CEO that’s very partnership-oriented.”

Jonathan Rhone, president and chief executive at Axine, previously led another start-up, Nexterra Systems Corp., where he established alliances with companies such as General Electric Co. and Johnson Controls Inc., according to Axine.

Axine uses electrolytic oxidation to treat toxic organics, ammonia and pathogens. The company says its method eliminates the need for chemicals and doesn’t produce sludge.

The company is about 12 to 18 months away from having an operational pilot project. Once it develops a commercial-sized cell that treats wastewater, it should be able to scale quickly by packaging as many cells as needed into modules. ”You are de-risking quite early on from the equity perspective,” Mr. Wells said.

Chrysalix’s oil and gas LPs didn’t co-invest in the company, according to Mr. Wells, because the technology is still too early-stage.

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