Enhanced Oil Recovery

Nitrogen-Hydrogen Supply for Agriculture

In Kansas, flow rates from the Barret 1-14B well increased to 2,581 Mcfpd over time, compared to the initial flow rate of 1,769 Mcfpd rate. Our Kansas operations achieved the desired result in giving us a nitrogen resource with high purity levels. In addition, the initial gas analysis also showed evidence of other valuable constituents, including argon and helium. We therefore installed a gas concentration unit to further investigate the characteristics of the produced gas and, amongst other things, the results evidenced hydrogen at concentrations around 8,000 parts per million.

 

This is potentially a very significant find. Scientific studies show that treatment of soil with hydrogen improves the growth performance of spring wheat, canola, barley and soybean by 15 – 48%. Hydrogen is a key promoter of growth of certain nitrogen fixing micro-organisms. These micro-organisms convert hydrogen and nitrogen into ammonia, which plants take up and utilize for growth. Thus, the addition of molecular hydrogen can impact soil fertility, which is particularly useful for controlled indoor growing operations where the application of traditional anhydrous ammonia based fertilizers is not practical.

 

It is very unusual to find naturally occurring hydrogen in this way. It is frequently found in oil and gas wells, but hydrogen collected from these wells is inevitably contaminated by hydrocarbons so making the gas toxic for agricultural operations. Consequently, Highlands’ gas mixture in Kansas exhibits the very rare characteristic of being entirely free of complex hydrocarbons. This makes it potentially suitable as a fertiliser and, even more significantly, as a fertiliser for organic crops without the need for any treatment whatsoever. Highlands is applying to the United States Department of Agriculture for a certified organic classification of its gas mixture. Obtaining this certification will be invaluable for access to the agricultural industry.

 

Highlands has entered into an agreement with District 8 Holdings, LLC for a pilot project. Highlands will receive initial revenues of $8,000 for the treatment of around 50 cannabis plants during the normal 90 days growing cycle. The supply of cannabis for both recreational and medicinal use in the State of Colorado is legal and District 8 has an important differentiating factor of being an organic grower. Cannabis is a high value crop compared with other agricultural products and, consequently, the value uplift of being organic is far more significant. In the event of a successful outcome, the directors expect that Highlands’ gas mixture will be equally applicable to other crops.

 

Assuming the pilot is a success then Highlands anticipates sales in far greater volumes. Furthermore, Highlands has agreed to appoint District 8 as its distributor for horticultural and agricultural cannabis and industrial hemp growing operations in the United States and Canada. Cannabis plant production is increasing significantly in the US and Canada with millions of plants grown annually. Highlands believes that capturing even a small percentage of the market would have a significant impact on the Company’s revenue.

 

The significance of having a naturally occurring source of hydrogen could be a highly valuable commodity for Highlands.