The Next Energy Revolution: Petrolithium

LONDON, January 4, 2017 /PRNewswire/ --

OilPrice.com Market Commentary:  The wait is over, and the results are in. The petrolithium era has begun.  Major players in the industry include Canadian Natural Resources Limited (NYSE: CNQ), POSCO (NYSE: PKX), Albemarle Corporation (NYSE: ALB), Imperial Oil Limited (NYSE: IMO) and Baker Hughes Incorporated (NYSE: BHI) amongst others.

Marking an official intersection between the energy sector and the new energy sector (or green energy), the process of extracting lithium from heavy oil EBD wastewater has been finally successfully proven, with enough of an economic upside to potentially change the how the oil patch looks at its water byproducts.

MGX Minerals (XMG.CN, MGXMF, 1MG) along with their water purification and engineering partners PurLucid announced that they'd successfully produced lithium from wastewater, with concentration levels high enough to warrant interest from the oil and gas sector.

The project specifically targeted heavy oil EBD wastewater to start, due to its mid-level concentrations of lithium, and high environmental revenue (based on current disposal costs).

"Who better to have a big piece of the new energy sector than the energy sector?" MGX President and CEO, Jared Lazersontold the National Post this week.

"I think there are going to be incredible efficiencies from oil and gas and new ideas as word starts to get out." 

Already, MGX has worked out a deal to work with samples from Canadian Natural Resources Limited [NYSE: CNQ], which is one of the largest producers in the region.

While it's still early in the trajectory for the petrolithium concept, it's not hard to project that once a successful pilot is staged, and a commercial plant is completed, other majors will come knocking on MGX's door.

Lithium Alchemy 

The push for an alternative method to extract lithium isn't new. It's been talked about for many years now, as the demand for lithium as a commodity has risen along with its price.

In North America, MGX Minerals has a very legally binding patent on the process of extracting lithium from petroleum-produced brines. As it stands, any new entity wanting to develop something similar must go through MGX's team, to either receive their blessing, or to partner on the development.

Outside of North America, there are similar entities pushing for new methods to produce lithium from brine.

The reason the desire for an alternative is so high, is because the solar evaporation method is time-consuming, making it more susceptible to market fluctuations.

The common turnaround time from brine to lithium on a solar evaporation operation is 18 months. As well, given the requirement for exposure to the sun, the ponds are also exposed to the elements, and vulnerable to weather shocks, such as flooding and wind.

The need for new methods to produce lithium is not going unrecognized.

Korean steel giant, POSCO [NYSE: PKX] broke ground on their massive lithium production facility in Argentina back in February of 2016.

The claim is that POSCO's method can reduce the turnaround time from 18 months, down to 8 hours.

Compared to MGX's method, POSCO's is a much larger scale, and requires much higher concentrations to be economic. Whereas MGX's concentration requirements are not as high, as the method is more of an addition to the current oilfield solutions available in dealing with water disposal.

The economics are quite different, as MGX's system has the added benefit of making less economic aging wells more economically friendly again.

Where POSCO will likely be making more partnerships with the major lithium producers in South America, such as SQM [SQM] and Albemarle [NYSE: ALB], MGX will find likelier suitors in major oil producers such as Imperial Oil [NYSE: IMO], and Encana Corporation [ECA], or giant oilfield service providers, such as Baker Hughes Incorporated [NYSE: BHI] or Halliburton [HAL].

Oceans of Lithium 

Whilst engineering the process itself for lithium extraction, MGX Minerals spent much of 2016 quietly amassing what they believe is Canada's largest lithium land position. In total, the company holds nearly 487,000 hectares of lithium brine bearing land.

Among that portfolio is the company's crown jewel, the Sturgeon Lake Lithium Project, and in particular the Devonian Leduc Formation that sits under it, is a massive lithium resource waiting to be unlocked.

The brines contained within this formation have been studied since the 1990s, but a more recent study done in 2011 by the previous owner of the Sturgeon Lake property's lithium rights showed concentrations greater than 75 mg/L, and up to 140 mg/L.

A resource estimate was compiled, and published on the Sturgeon Lake property, which was calculated to be approximately 2 million tonnes of lithium carbonate.

While impressive, the resource was deemed to be non-compliant with NI43-101 regulations on the caveat that the method of producing lithium from said brines was not established yet.

Upon assuming control of the property, MGX Minerals has a major reward being dangled in front of it, in the form of a 2 million tonne lithium resource, should they suitably satisfy those in charge of approving the resource's standard of compliance.

That acquisition was in August, and since then MGX has made significant progress in proving that their hypothesis is correct.

In order to receive the stamp of approval, MGX must prove that it's economically possible to recover lithium from these brines. If one couples the service fees collected by removing minerals from wastewater of major producers, along with the commercial sale of the minerals themselves, MGX definitely has a chance to reverse the decision on the resource estimate, and bring it back into compliance.

With the announcement that MGX and PurLucid having successfully produced lithium from the first pass sample, it's one more hurdle out of the way to unlocking the resource, and awakening an investment community to the possibility of adding Alberta to the lithium producers map.

The Initial Results Are Promising 

Prior to the extraction process laid out by MGX and PurLucid, the heavy oil EBD wastewater used had a concentration of 87 mg/L. After the initial process was completed, the final recovery of the Li was 34.8 mg/L, or 40%.

Considering the volume in play for MGX, based on their massive lithium mineral rights holdings, as well as compared to recovery rates from many solar evaporation production sites around the world, a 40% recovery is a great starting point.

Solar evaporation methods in comparison can recover from as little as 28.1% to as high as 74%, depending concentration levels, and time allotted to evaporating out water in volume. A loss of Li+ recovery of 55% is relatively normal.

From the data obtained from the first pass sample done between MGX and PurLucid, the 40% recovery was accounted for at each step. And while some lithium was lost in these steps, other saleable commodities were recovered for other uses, such as salts, and other minerals.

According to Dr. Preston McEachern of PurLucid, the breakdown of the lithium losses were as follows:

• 18% of the Li was lost during the removal of hydrocarbons, silica and other solids
• 1% of the Li was lost in the process that recovers NaCl (salt) for commercial sale
• 16% of the Li was lost when removing sulfur contaminants, and recovering MgO
• 4% of the Li was lost in the step that recovers CaCl2

Overall, the process was a success, in that it successfully produced crystallized lithium carbonate, as well as other commercially valuable minerals such as boron and vanadium. As well, the water itself was improved upon, by removing 99.9% of the silica, and 99.7% of the hydrocarbons, making the remaining water suitable for reuse in steam generation.

What's next? 

MGX has so far met its timeline projections, having officially produced lithium prior to the end of 2016. Next on deck, the pilot plant's completion is expected in the coming months. A successful run with the pilot will warrant the construction of a much larger facility, likely within the Sturgeon Lake property's borders.

Given the friendly relationship with CNRL, and the access MGX is afforded to their infrastructure, it's feasible to project that a collection facility for produced water would align with CNRL's lines.

As well, MGX and PurLucid have extended the option for MGX to fully acquire their partner its water treatment processes.

MGX will certainly hone its focus more on the petrolithium aspect of its portfolio going forward, especially with the potential in pace when looking to unlock Sturgeon Lake's 2 million tonne lithium resource, and bring it into compliance.

Lithium prices hovered between $12,000-$14,000 per tonne for most of 2016. At $12,000 per tonne, that would put the gross value of Sturgeon Lake's 2 million tonnes at more than $20 billion.

To put that into perspective, MGX has already stated their goal is to reach the capacity to process a million barrels of brine per day. Once they can achieve a recovery rate that delivers concentrations of around 50 mg/L, they'll be on their way to produce upwards of 14,000 tonnes of lithium carbonate per year.

The petrolithium era has begun, and it starts in 2017.

By Joel Chury for Oilprice.com

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