Velocys to Begin Work on Department of Defense Funded Synthetic Fuel Program

COLUMBUS, Ohio--Sept. 23, 2004--Velocys is beginning to work with the U.S. Department of Defense's National Automotive Center (NAC) on a synthetic fuel process. Synthetic fuel is a generic name given to hydrocarbon fuels produced from natural gas, coal and other non-petroleum resources. These fuels have the potential for greatly extending the world supply of liquid fuels, enabling fuel production to occur near the point of use and lessening U.S. dependency on foreign energy supplies. The program is valued at $2.5 million and spans the entire 2005 fiscal year.

Velocys will apply its revolutionary microchannel process technology to Fischer-Tropsch synthesis and other key components of the synthetic fuel production process. The ultimate goal is to intensify the system to a degree that will allow synthetic fuel production units to be transported via barge or truck. According to Pat Muzzell at the National Automotive Center, "Velocys' technology shows great potential to remove some difficult hurdles that have prevented wide spread production and adoption of synthetic fuels for use in both the military and private industry."

The Army and other branches of the military are keenly interested in new technologies that will minimize the amount of fuel that must be transported into war zones for fueling vehicles and aircraft. Synthetic fuel production units utilizing Velocys Technology reactors could enable the production of vehicle ready fuel to be made in the field from indigenous natural gas and other resources. Wayne Simmons, CEO of Velocys, describes their technology as "a revolutionary approach to chemical processing that enables much smaller reactors to produce the same quantity of product, more efficiently."

A successful program will open the door to many commercial gas-to-liquid opportunities. Utilization of stranded natural gas is one of the largest business opportunities for the energy industry. By providing a compact, economical process for producing synthetic fuels, Velocys Technology can enable the monetizing of vast natural gas reserves in remote locations including those found offshore.

The work approved for the initial $2.5 million focuses on advancing Velocys' existing Fischer-Tropsch reactor design, tailoring catalyst for microchannel devices and determining the other elements required to produce synthetic fuels in the field. If funded, future work will include a pilot plant demonstration and production of synthetic fuel for testing in military vehicles and aircraft.

About Velocys

Velocys, Inc. is developing revolutionary processing systems that will provide chemical and energy companies with substantial capital cost savings, improved product yields and greater energy efficiencies. Velocys was incorporated in 2000 by Battelle Memorial Institute to develop and commercialize a patented microchannel-based technology for the chemical and energy industries. Velocys has extended this licensed portfolio of intellectual property to create a new, disruptive technology capable of significantly increasing the profitability of chemical and energy processing. Velocys is headquartered near Columbus in Plain City, Ohio. For further information call 614-733-3300 or visit www.velocys.com.