SYDNEY, AUSTRALIA: Grand Gulf Energy (ASX:GGE) through its majority-owned incorporated JV company Valence Resources LLC has entered into a strategic alliance with helium refiner and seller Paradox Resources LLC.
Paradox is the owner of the advanced Lisbon Valley Helium Plant located 20 miles north of the Red Helium Project.
The alliance, designed to fast-track and optimise the significant commercial opportunities that exist in the current buoyant helium market, comes on the back of the recent execution of a Gas Sales & Processing Agreement with Paradox, which provides Grand Gulf with a path to monetisation, with minimal CAPEX / time delay, for the Company’s maiden pure-play helium well, Jesse#1.
Managing Director Grand Gulf Dane Lance said, “The Strategic Alliance with helium offtake partner Paradox Resources is a huge step for the Company as it becomes the potential priority raw gas helium supplier to the all-important high-purity helium market that currently commands prices of around US$1,000/mcf.
The Company will also partner with helium plant owner Paradox Resources in marketing to high-tech end users such as semi-conductor manufacturers and the space industry as well as exploring any collective corporate transactions/opportunities.
The Strategic Alliance has already identified two potentially revenue-generating CO2 disposal options, both of which will be more fully developed in the short term.”
Restart of Paradox Resources’ Helium Liquefier
The advanced Lisbon helium processing plant has both a Liquefaction Plant and a Purification Plant. The Purification Plant produces 99.9989% helium purity gas whilst the Liquefaction Plant produces a superior 99.9995% helium purity product that commands premium pricing, with the company advised of recent US spot market prices over US$1,000/mcf2.
Due to a lack of raw helium supply, Paradox has been unable to restart the Liquefaction Plant; a discovery at the Red Helium Project will assist in providing the requisite/minimum volumes for the Liquefaction Plant to be restarted with helium from the Red Helium Project prioritised.
Collaborative Marketing to High Purity End Users
To optimise value received for premium helium, Valence and Paradox have agreed to jointly identify and market helium to high-purity helium end-users in the semiconductor, medical, research, space and defence industries.
Expansion of Existing Offtake and Commercial Alignment
Expansion of the terms of the recently executed Gas Sales & Processing Agreement by including the processing of gas supplied by any successful helium wells subsequent to Jesse#1. The parties recognise that there are potential synergistic commercial benefits in assessing corporate opportunities that involve both Paradox assets and the Red Helium Project and have agreed to jointly pursue such opportunities.
Options for CO2 Disposal – Enhanced Oil Recovery and Carbon Sequestration
The Strategic Alliance explores several pathways to dispose of, and derive revenue from, the Red Helium residual gas stream (primarily carbon dioxide and nitrogen) including enhanced oil recovery at Paradox-owned oil fields and carbon sequestration (with potential revenue from the US Government under 45Q of the US Tax Code) together with other storage/disposal options.
The Lisbon Valley Gas and Helium Plant is currently sequestering CO2 and is well advanced in the permitting process to qualify for carbon capture tax credits under Section 45Q. The current understanding and legislation in the United States values the tax credits at $50 per metric tonne (mt) of CO2 for sequestration and $35/mt for CO2 permanently stored in enhanced oil recovery processes by 2026.3
The Strategic Alliance includes a jointly funded US$75,000 carbon dioxide enhanced oil recovery feasibility study on Paradox Resources’ Lisbon hydrocarbon field. The Strategic Alliance is structured to explore mutually commercially advantageous revenue sharing arrangements, but the company has been advised CO2 is selling for approximately US$1.5/mcf for similar projects in the area.
Appointment of Strategic Alliance Consultant
The company has engaged a specialist helium consultant with considerable experience in helium processing, sales and marketing to facilitate and drive the Strategic Alliance. 13.5 million GGE shares will be issued as payment for the consulting services.
Helium Market – Brief Update
Ongoing supply-side issues including the outage at the US government’s BLM Cliffside facility (10% global supply) and the Amur facility incident (10 – 20% global supply) have put extreme pressure on the global market, and in particular the US spot market, with the company advised of US spot prices in excess of US$1,000/mcf for research grade helium (160mcf tube trailer). Retail prices have increased more than 200% in the UK, and many suppliers in the US are now in Force Majeure.
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