Blue Star Helium partners with IACX Energy on Voyager helium plant in Colorado

Blue Star Helium (ASX: BNL) leapt 30% higher in early trade after the company came out of a trading halt to announce a major new deal in the US.

The master services agreement (MSA) with Dallas, Texas-headquartered IACX Energy, will see Blue Star provide helium recovery services through the delivery and operation of a helium recovery plant at its maiden helium development at the high-grade Voyager project in Colorado.

In turn, IACX will supply and operate the helium plant in exchange for a monthly payment, freeing up Blue Star from any capital costs associated with fabrication of the plant.

IACX is a fully integrated helium production, processing and marketing business with gas gathering and processing assets concentrated in central Kansas, eastern New Mexico and the Texas Panhandle.

IACX Energy’s active projects

It currently operates 14 discrete helium recovery plants in seven states in the US and one Canadian province. One of the existing helium facilities is located in Las Animas County, Colorado neighbouring Blue Star’s Galactica/Pegasus prospect.

“Our selection of a third party operated plant option for the high-grade Voyager discovery has now been cemented with the execution of this agreement with IACX,” said Blue Star’s managing director and chief executive officer, Trent Spry.

“As well as delivering significant de-risking benefits in terms of upfront capital, time and operating profile, adopting this pathway has also eliminated any requirement for Blue Star to commit to price- concession offtake agreements. The result is that we can target the premium pricing available in short-term U.S. contract markets and spot sales, with current pricing estimates understood to be running at $680 to $4540/Mcf for 98 to 99.999% purity helium.”

Potential to expand Voyager

Blue Star has already identified the potential to expand the Voyager plant with the addition of a modular membrane unit or addition of a second PSA plant to increase helium output in the future. It is also investigating an upgrade via the accommodation of additional high-he-concentration raw gas from surrounding discoveries.

“We are excited to be advancing along the development pathway toward targeted first production from Voyager during Q4 CY2023. In parallel, we continue to advance development planning for the Galactica/Pegasus discoveries and mature our extensive exploration portfolio utilising our proven exploration techniques,” Mr Spry said.

IACX will utilise its proprietary, PSA-based helium recovery units. The company is confident this will create economical helium extraction and purification from natural gas to high purity with minimal helium losses.

IACX expects to install and commission the facility during Q4 CY2023, subject to receipt of all necessary permits, surface use and access agreements. Product sales are expected to commence immediately after first production.

Agreement terms unveiled

Under the MSA Blue Star must provide a secure site, access to the facility and deliver the raw gas to the facility inlet. IACX will receive a monthly gas processing fee for its services.

The facility is planned to start up on site-generated power before eventually transitioning to grid power.

The facility will remain the property of IACX throughout the term and subsequent to the termination of the MSA.

Helium production wells

Blue Star has permitted two wells at Voyager for drilling and is currently seeking permits for a further four wells.

The drilling of the production wells is targeted to kick-off during August.

Blue Star plans to undertake pressure and flow testing on these wells post drilling.

Market opportunities

Helium has a wide range of uses in the healthcare industry. It can reach a temperature of -269° C, making liquid helium the best option for cooling the magnets of MRI machines. Helium is also being used for breathing observation. It is an essential component in treating emphysema, asthma, and other conditions that affect breathing.

The gas is usually used to treat lung diseases. Oxygen and helium are used together for the treatment of acute and chronic forms of respiratory ailments, as the combination reaches the lungs faster than all the others. There is no substitute for helium in cryogenic helium applications.

Blue Star is investigating a number of helium marketing opportunities and is initially looking to sell helium volumes via premium short-term contracts or in the spot market.

It says that short term helium sales contracts are currently priced at a significant premium to long term contracts.

According to Mordor Intelligence, the helium market is projected to register a CAGR of greater than 4% between 2023 and 2028.