Nov. 15 (Bloomberg) -- As chairman of the oil company Solv- Ex Corp. in the 1990s, John Rendall triggered $825 million in losses for investors when his attempt to pump crude from Canadian bogs failed and a U.S. judge fined him for lying about it to shareholders.

Now, with crude holding above $90 a barrel, Rendall is back in the business, saying he's figured out how to extract oil from stones in the Australian outback. He sold his patented process to Blue Ensign Technologies Ltd. in 2006 and amassed a 43 percent stake in the Double Bay, Australia-based company, now raising money from private investors.

Rendall's technology has to work in the field this time and be cost effective for Blue Ensign to succeed. Major oil companies abandoned a similar process 20 years ago because it was too expensive. The company's goal is to produce as much as 2 billion barrels of crude oil from shale deposits in Queensland, Australia. That's enough to fill all the refineries along the U.S. East Coast for more than three years.

``This is the world-beater,'' said Rendall, 73, referring to his latest oil extraction process. ``I've got the most brilliant technology.''

Perhaps. It's been tested only in a lab so far, said Cole Nelson, Blue Ensign's general manager.

Oil prices more than tripled in the past five years, reaching a record $98.62 a barrel earlier this month on the New York Mercantile Exchange. The rally has spurred interest in alternative energy sources and petroleum deposits such as shale once thought too costly to exploit.

Distance

Blue Ensign's executives tout Rendall's technology as a way to tap those resources. Meanwhile, their ability to raise capital may depend on how well they distance themselves from Rendall himself.

``The future of the Rendall Process lies with the company and not with JR,'' Blue Ensign Chairman Christopher Ryan wrote in a Sept. 25 e-mail to Bloomberg News. Rendall ``has had nothing at all to do with any of the fund raising done by Blue Ensign'' and he's not a director of the company, the message said.

``The Solv-Ex history has been a source of concern to each of us and I assure you that it has sharpened the determination of each of us to critically review the merits of the Rendall Process and its potential commercial merits,'' Ryan's message said.

Ryan added that ``no statement made in our draft prospectus relies on the assertion of John Rendall. Everything has been verified independently of him.''

Assets

Blue Ensign has raised $4.5 million so far, including $2.7 million from the money management unit of Commonwealth Bank of Australia, the country's second-biggest bank. Rendall received $715,000 for exclusive rights to use his technology in Australia. He can make about $2 million more for a portion of the international royalty rights he retains, according to a Nov. 13 company filing with Australian securities regulators.

The company also acquired oil and mineral rights to a 93 square-kilometer tract in Julia Creek, Queensland, about 1,300 miles (2,100 kilometers) north of Sydney.

A planned IPO of the company's subsidiary, Queensland Shale Oil Ltd., has been postponed three times in the past 18 months due to lukewarm investor response. ``We're down to our last half-million'' dollars, Ryan said in an interview.

Extracting Oil

Rendall, a chemical engineer, says he's figured out how to extract oil from shale more efficiently than the world's biggest oil companies. Netherlands-based Royal Dutch Shell Plc, Irving, Texas-based Exxon Mobil Corp. and San Ramon, California-based Chevron Corp. are spending about $100 million annually to find out how to turn shale into crude oil in western Colorado. They abandoned the techniques Rendall favors -- strip mining and rock cooking -- more than two decades ago because it cost too much, said James Bartis, an oil analyst at Rand Corp. in Santa Monica, California.

Rendall's process involves mining shale and mixing the rocks with a petroleum-based liquid fuel similar to diesel. The mixture is heated to 450 degrees Celsius (842 degrees Fahrenheit) in a closed chamber before it's fed into a second unit where hydrogen from the fuel helps create higher-quality oil.

Natural-gas vapors are captured to make hydrogen for the processing unit and to run generators and boilers, Rendall said. The fuel used to heat the shale is recycled.

Since the rocks are heated in a closed chamber, the process minimizes or eliminates harmful greenhouses gases, Rendall said.

Rendall said his process also will extract vanadium, molybdenum and Portland cement from shale, boosting profitability. Vanadium, a metal whose price rose 450 percent in the past five years, is used in special types of steel for surgical instruments and jet engines. Molybdenum is used to strengthen the armor of tanks.

Legal Woes

That's how Rendall's patented process is supposed to work. His earlier attempts to produce oil, using different techniques, were ill fated.

Rendall was born in India and received post-graduate degrees in chemistry and engineering in London. He designed and managed chemical plants in the U.K. in the 1960s and 1970s, then moved to Albuquerque and formed Solv-Ex in 1979.

In 1998 the Securities and Exchange Commission filed a civil lawsuit against Solv-Ex and its officers, accusing the company of lying to its shareholders. From 1995 through 1997, Rendall and Herbert Campbell, the company's general counsel, issued bogus statements to shareholders that fooled investors into believing Solv-Ex had developed methods for producing crude oil and aluminum from fields of tar-soaked sand in northern Alberta, Canada, according to the SEC's complaint.

Misstatements

On April 3, 2000, U.S. District Judge Bruce Black in Albuquerque ruled that Rendall and Campbell violated securities laws by lying to shareholders about the effectiveness of the company's technology. The misstatements boosted Solv-Ex stock to a peak of $36.87 in January 1996 from $4.53 13 months earlier, according to the SEC, raising the value of Rendall's 3.56 million shares to $131.3 million.

When the SEC probe of Solv-Ex became public, the company's shares sank and investors lost $825 million. Rendall blamed stock speculators for the demise of the company, which filed for bankruptcy protection in August 1997. Rendall quit as chairman and chief executive in November 2000, and the company ceased operations.

Rendall was fined $5,000, the maximum penalty at the time. Campbell was also fined $5,000 and barred from serving as counsel of a publicly traded U.S. company. No criminal charges were filed against Rendall, Campbell or other Solv-Ex officials. Rendall's appeal was rejected in March 2006.

In its 20-year existence, Solv-Ex never produced oil in commercial quantities and failed to record a profit.

`No Big Deal'

Rendall dismisses his prior legal troubles. ``I have a mark against me, I know that,'' he said from his home in Albuquerque. ``I got slapped on the wrist. It was no big deal. The $5,000 tells you it was no big deal.''

Fred Chavez, senior special counsel for enforcement in the SEC's Denver office, disagrees. ``Fraud is fraud,'' Chavez said. ``The fine is not at all indicative that this was something inconsequential that occurred. When we do something like this we do it for a good reason: Because they violated the law.''

Michael Archibald, a grocery-store manager in Keosauqua, Iowa, lost his retirement savings investing in Solv-Ex in the mid-1990s. Archibald says he has no interest in investing in Rendall's newest venture.

``I guess I'll be working the rest of my life because that set me back quite a bit,'' says Archibald, 59. ``I don't think I would invest in Rendall again. As they say, once burned.''

Ryan, a native of Perth, Australia, spent 27 years at Schroders Plc, a London-based fund management company, working on its energy team and as director of corporate finance at the company's Australian unit. He joined Blue Ensign's board in 2002 and became chairman two years later as he attempted to breathe new life into what was then a dormant dot-com company.

`Potential to Deliver'

Ryan was introduced to Rendall in early 2005 by RobSearch Australia Pty Ltd., a North Sydney-based engineering firm Rendall had hired to evaluate his process. RobSearch concluded that Rendall's ``technology has clear potential to deliver outstanding advances over existing processes.'' Rendall then asked the firm to help him find financial backers, Ryan said.

RobSearch's managing director John Blumer is now a director at Blue Ensign. Frank Ciotti, who was Rendall's chief financial officer at Solv-Ex and became its chairman and CEO when Rendall resigned in 2000, is the other director of Blue Ensign's three-person board, and owns a 14.2 percent stake.

Raised Eyebrows

``John's history raised eyebrows of everyone who's joined the team, sure,'' Ryan said. ``When they first come aboard they spend some time wondering if you can really divorce this current activity from what they've heard about Solv-Ex. But once you get to know John, you realize he's a very decent bloke.''

David Whitten, a fund manger at Sydney-based Colonial First State who acquired a 24.3 percent stake in Blue Ensign for the funds he oversees in June 2006, declined through spokeswoman Caroline Regidor to comment. The investment made Colonial the second-largest shareholder after Rendall.

Rendall disclosed his stake in Blue Ensign to the Australian Securities & Investments Commission in a June 2006 filing, as required under Australian securities law. The prospectus for the Queensland Shale Oil IPO isn't finished, according to the Nov. 13 filing.

Rather than excavate boulders and haul them to an industrial furnace for processing, Exxon and Shell are researching ways to heat shale underground for several years until the organic matter turns into crude and flows to the surface in wells. Chevron is trying to do something similar, using chemicals rather than heat. It may take 10 years or more before the companies begin producing shale oil in commercial quantities.

``That's for the birds,'' Rendall said. ``They're so clever, let them do it. How do you know what's happening underground? You can't see what's happening.''

To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net

Last Updated: November 15, 2007 00:22 EST