Verde Clean Fuels, Inc. and Cottonmouth Ventures LLC, a subsidiary of Diamondback Energy, announced that the parties have executed a Joint Development Agreement (JDA) for the proposed development, construction, and operation of a facility to produce commodity-grade gasoline utilizing associated natural gas feedstock supplied from Diamondback’s operations in the Permian Basin.
The JDA provides a pathway forward for the parties to reach final definitive documents and Final Investment Decision (FID) for the proposed project. The JDA frames the contracts contemplated to be entered into between the parties, including an operating agreement, ground lease agreement, construction agreement, license agreement and financing agreements as well as conditions precedent to close, such as FID.
The expectation for the project is to produce approximately 3,000 barrels per day of fully refined gasoline utilizing Verde’s patented STG+® process. By consuming natural gas in the pipeline-constrained Permian Basin as feedstock, the proposed project could demonstrate the ability to mitigate the flaring of up to 34 million cubic feet of natural gas per day, while also producing a high-value, salable product.
“The Verde Clean Fuels team is incredibly excited to finalize this JDA with Diamondback Energy with the goal to produce gasoline from natural gas in the Permian Basin,” said Ernie Miller, CEO of Verde. “This arrangement brings compounding economic and environmental benefits to West Texas. We believe that the ability to de-bottleneck midstream constraints along with the potential to reduce flaring of natural gas, while creating less carbon-intensive gasoline, is of paramount interest to natural gas producers.”
“This agreement, with the first planned project in Martin County, fits perfectly with Diamondback’s strategy to decarbonize the oil field while ensuring a return for our investors,” said Kaes Van’t Hof, President of Diamondback. “Additionally, the scalability of the project is incredibly exciting, with similar natural gas-to-gasoline facilities possible across Diamondback’s locations in West Texas. We are proud to partner with Verde to bring this technology to the market.”
The proposed facility, which is to be located in Martin County, Texas, in the heart of the Permian Basin, could serve as a template for additional natural gas-to-gasoline projects throughout the Permian Basin and other pipeline-constrained basins in the U.S., as well as address flared or stranded natural gas opportunities internationally.
