LONDON, November 21, 2016 /PRNewswire/ --
OilPrice.com Market Commentary: For those who follow the international lithium sector, all eyes are on MGX Minerals Inc. (MGXMF) and their upcoming "petrolithium" pilot project, designed to prove the economic viability of processing lithium production from petroleum brine water. Additional companies in focus today include: Exxon Mobil Corporation (NYSE: XOM), Baker Hughes Incorporated (NYSE: BHI), Halliburton Company (NYSEL: HAL), Albermarle Corporation [NYSE: ALB] and Suncor Energy Inc. (NYSE: SU)
It's a big task, with a gigantic reward, should they prove their concept to be commercially feasible.
With such a breakthrough in play, a successful pilot would not only summon the interests of major oil producers with interests in Alberta, such as Exxon Mobil [NYSE: XOM] and Imperial Oil (IMO), but also major oil field service companies like Halliburton [NYSE: HAL] and Baker Hughes [NYSE: BHI], and major lithium players too, like Albermarle [NYSE: ALB] and SQM [SQM].
While major oil producers constantly face the conundrum of what to do with leftover water, and most lithium producers are forced to wait through an 18-month process to produce their wares, the idea of solving two problems at once is mighty appealing.
Currently, the world's lithium supplies come from one of two production methods: solar evaporation, and hard rock mining.
Both have their pros and cons, including a large difference in production time, cost, and availability.
MGX's method will likely make a bigger impact on solar evaporation than on hard rock mining.
Both the conventional method of solar evaporation, and MGX's proprietary process involve separating lithium from a salt brine. However, the conventional method requires 18-months to produce the lithium, and utilizes a massive surface footprint to do so.
The "petrolithium" concept, requires very little surface footprint, and is expected to produce lithium within hours instead of many months.
But aside from just the innovation of a faster, less intrusive method of lithium production, the MGX method also provides a potentially monumental breakthrough for the petroleum industry that would open a potential client base comprised of a who's who of the oil industry's biggest producers and service providers, all of which are currently dealing with the same problem: What to do with the brine water produced by many of the oil patch's wells.
WATER, WATER, EVERYWHERE
There's no shortage of salt brine water that's available out there in the oil patch. Today, the water is seen as a hindrance, in need of action, whether it be through reinjection, or storage in giant tanks.
However, the brine itself has long been known to contain valuable minerals including lithium, potash, and other salts. Throwing it away, or reinjecting it into the earth is not only a waste, but an environmental hazard.
In fact, the long-trumpeted theory that the act of fracking by the oil industry is causing earthquakes has recently been debunked, with a new cause to blame: water injection.
According the United States Geological Survey (USGS): "Fracking is NOT causing most of the induced earthquakes. Wastewater disposal is the primary cause of the recent increase in earthquakes in the central United States."
So, while many outspoken environmental activists will likely take a while to catch up with this new revelation of water's role in these geological incidents, it's clear that there is an opening up of demand to do something else with the water produced from oil wells so as not to cause more damage.
In choosing Alberta's Sturgeon Lake area to begin their project, MGX has selected a vast source of brine in which to produce its goal of commercial lithium.
In fact, the property already was assessed for its lithium potential by the previous owners, prior to when MGX took it over. A resource of 2 million tonnes of lithium was calculated, which as of right now is considered non-compliant, as regulators won't greenlight those numbers until a proof of concept is delivered.
In order to reach NI 43-101 compliance for this resource, MGX is expected to prove that lithium production is commercially viable, and overall possible.
Thus, the project itself is far more than just a science fair project. It has the potential for billions of dollars' worth of a lithium resource attached to it.
MGX may have a major resource on its hands, but it would also stand to gain massive amounts of business from major oil companies looking to do something useful with the water they produce rather than cramming up storage tanks, or potentially causing more earthquakes with reinjection.
STATUS OF THE PILOT PROJECT
Just last week, MGX and its partners PurLucid Treatment Solutions Inc. announced that the pilot program is on schedule, and is now 50 percent of the way towards completion of construction of the pilot plant itself.
The process involves two stages, with the first being the removal of particulates and other dissolved materials, including emulsified oil, colloids and heavy metals, which otherwise may interfere with the mineral extraction phase.
This first step is essential in providing the lithium production phase with a clean and consistent flow of lithium-bearing brine and other minerals for extraction. It's in this step that the expertise of PurLucid's technology is essential. (NOTE: Already PurLucid has retained a respectable client list with their services, that includes Imperial Oil, SunCor [NYSE: SU] and Shell (RDS-A, RDS-B).
The second phase is the one that everyone has their eyes on. This is where the separation out of the lithium and other valuable minerals takes place.
It's in this phase where MGX filed a patent that covers the United States and International rights for producing lithium in this way. Any future entity that wants to attempt to separate out lithium from salt brine through a chemical process will have to go through MGX's legal channels to do so. This recent patent filing is actually in and of itself a major value addition to MGX's portfolio, especially once they can prove that their team knows what they're doing.
What skeptics of the process need to see is whether MGX can keep the costs of the technology down low enough to commercially extract the lithium from the brine. The pilot plant project is designed to prove feasibility at first on a lower scale, before scaling up to much larger operations, and into many other oil fields around the world.
Right now, the method is designed and optimized for the highly-mineralized brines associated with MGX's Alberta lithium portfolio, which is comprised of more the 376,000 hectares of lithium-bearing oilfield brine properties throughout Alberta.
These oilfields are already currently generating over a million barrels per day of salt brine.
While the company has yet to formally announce any major partnerships with large scale producers, they are in negotiations with several majors throughout Alberta, and have some initial agreements in place.
The idea is that the pilot plant should show workable economics, thus giving a greenlight to commercial units that are modular and scalable to be deployed throughout the oil patch.
By incorporating PurLucid's technology to the process, MGX also has the option in place to definitively acquire 100 percent of their partners through a comprehensive agreement with a binding LOI and a roadmap to full ownership.
To date, MGX has invested $90,000 CAD into PurLucid for development and commercialization of its existing patented water purification technology, as well as integration of MGX's patent-pending lithium and mineral extraction technology.
Upon owning both PurLucid's technology of separating out the solids, and their own technology of deriving the minerals, MGX will have the market cornered, not only on water stewardship in the oil patch, but on a game-changing method to produce lithium for the expanding green-energy sector.
Going forward, the company will look to expand out its production capabilities from this initial pilot plant's 12,000 liters of brine per day, to a future plant capable of handling over a million liters per day.
At concentrations of 50mg/L, being able to process over a million liters per day would potentially produce upwards of 14,000 tonnes of lithium carbonate per year. At today's pricing of $12,000 per tonne, the potential from one plant would be revenues of nearly $170 million per year.
Since MGX already has over 376,000 hectares of brine-bearing property in its portfolio, with a non-compliant resource of over 2 million tonnes of lithium, it's understandable why there's so much anticipation over whether the technology works. That resource alone would become worth over $20 billion in the ground.
So, as the project gets underway, expect more eager parties to take interest in MGX's petrolithium dream. For if they can prove it's economically viable, there's going to be a major splash not only in the lithium market, but in the entire oil industry as well.
By. Joel Chury for Oilprice.com
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