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Electronic security for OIL/LPG tanks

Periodic Reporting for period 1 - E-LOCKS (Electronic security for OIL/LPG tanks)

Reporting period: 2015-05-01 to 2015-08-31

Gasoline, Diesel LPG and other oil distillates play a critical role in our economy turning fuels into an easily sold commodity that cannot be traced and which garners a high return in the black market. Theft and fraud of fuel represent a substantial loss to distribution companies (0.5 to 2% in loss of revenue) and governments all over the world (only in Europe it is estimated around €2.9 billion), as well as an environmental and personal hazard. Moreover, Increasing competition in liberalized markets, as well as downfall in the demand of oil in Europe, are pushing oil and gas companies towards investing in solutions to minimize costs and maximize efficiency throughout the distribution chain.
We propose to prevent such practices and the consequent economic loss with an innovative security solution for oil/LPG tanks based on the installation of a lock per tank which will be opened by a smart key, remotely managed from the Management Distribution System.
In WACnGO, our activity started in 2008 with the development of a powerful system to provide an integral logistics management solution to the liquefied petroleum gases (LPG) and oil distribution companies, based on software (SW) tools and hardware (HW) devices to control, maintain and optimize the logistics and operation of this industry. In WACnGo we are focusing on this market segment (in 2013 world demand of oil products including LPG amounted globally 5211 million m3, corresponding to Europe 7661 million m3 at a compound annual growth rate (CAGR) of 5,25% for the period 2009-2013) through the offering of innovative solutions and by being adaptive to customer needs, which have made our company the leading solution provider in Israel and Latin America, mainly in Brazil where we have a subsidiary (WACnGO Brazil).
Right now, we are increasing the penetration of the Jupiter solution which manages and monitors Oil/LPG tank level to complete lorry control of the distribution. The e-lock project is a natural continuation and evolution of our innovation efforts, to provide a safe and efficient fuel supply chain.
We conducted a feasibility study with the objective of gaining further insight in the technical details and commercial tasks required to introduce the solution in the international market.
From a technical point of view, we have established a detailed plan to realize all the product development activities, as well as the provision of additional personnel to conduct the development. Initial design of the product has been updated by introducing a powerless solution that eliminates the need to monitor and substitute batteries in the field. We have concluded that the product can be simplified and cost for the end user reduced by developing an android app that will be able to control the e-lock functionalities from a mobile device. We have designed the conditions necessary to conduct a field test of the prototypes and engaged with the distribution company Supergaz to conduct it. Moreover, we have conducted a deep intellectual property analysis and found that no conflict exists to protect the results of the e-lock project. We have also searched potential manufacturers of the hardware components of e-lock for the prototypes and the commercial application.
From a commercial point of view, we have evaluated the potential market and concluded that it is foreseeable that the market will continue to growth, especially due to the necessity of the end users to attain operational efficiencies due to a narrow profit margin in the fuel distribution industry. Analysis of competition shows that there are some partial competitors entering the market, proving the point of the interest on the end-user side. We have profiled our target markets for initial introduction of the project results. We have gathered intelligence of the market and the main potential clients have been identified and quantified in terms of the amount of tanker trucks they operate. We have concluded that the within our target companies, they operate an average fleet of 200 trucks, we have used this information to build our sales projections and the business case for our clients.
From a financial point of view, we have evaluated the investment necessary to complete the technical and commercial task for the commercialization of e-locks. The evaluation of the necessary efforts to conduct the tasks on the work packages, the costs to manufacture the prototypes, as well as the services that will be contracted to manage IP protection and brand positioning have been considered.
The E-lock project is aimed towards protection of infrastructures containing hazardous substances (Oil and LPG. Tampering or of access by non-trained operators lead to a risk of electrostatic discharge accidents and the possible mixing of different qualities of oil and gas (estimated to be the cause of 66% of accidents). Moreover, fuel fraud and smuggling is a substantial loss for governments in the form of non-collected taxes. It is estimated that fuel fraud cost 2,920 € million to European governments in 2009.

The development of the E-lock solution will foster the market penetration of our company into European markets and support market growth in our current markets (Israel, Brazil and United States). Our conservative projections shows cumulative gross profit in five years from initial commercialization of €16 Million.