Helium rose back into the news recently, in part because of drilling exploration programs planned for an area along the Alberta-Saskatchewan border in southern Canada.
North American Helium Inc. of Calgary announced in May it had arranged additional equity financing of about $29 million (in U.S. dollars) to purchase and construct its second helium purification plant at the Battle Creek field in southwest Saskatchewan and to fund an active drilling program.
“The government of Saskatchewan continues to be very supportive of our plans and we have obtained all regulatory approvals to proceed with construction. We anticipate plant equipment delivery and construction to take 12 months with commissioning and start-up scheduled for July 2021,” said Marlon McDougall, NAH president.
“This facility will have a throughput capacity of 160 thousand cubic feet per day of purified helium, 20 MMcf/d raw gas, making it the largest helium purification system in Canada,” he added.
Earlier this year, Alberta’s provincial government introduced a new royalty rate for helium production.
“Effective April 1, 2020, the helium royalty rate is 5 percent minus a Helium Royalty Adjustment Factor of 0.75 percent, leading to an effective rate of 4.25 percent for all wells in Alberta from which helium is recovered,” it announced.
A number of other companies are reportedly involved in North American helium exploration projects, including Desert Mountain Energy Corp. and Royal Helium Ltd. of Vancouver, Weil Group Resources LLC in Richmond, Va., and Australian explorer Blue Star Energy.
DME announced in mid-June it had commenced drilling its first helium exploration well in Arizona’s Holbrook Basin. The well, in Navajo County in the central portion of the basin, was targeting a total depth of about 2,790 feet.
The company’s technical team had identified five potential target zones for helium-bearing gas at varying depths, DME reported.
The Ups and Downs of Helium
Why this new interest in helium exploration and supply development? The industry’s activity follows a period of helium-supply scarcity and higher helium prices, and reflects an evolving future for helium around the globe:
- The world’s helium-supply picture is changing, with the sell-off of the United States Helium Reserve expected to be completed by 2023 or 2024.
- Helium projects in Qatar, Algeria, Russia and elsewhere will come online and add substantial global supply in the 2020-24 timeframe.
- Exploration to develop added helium supply continues in southern Alberta and Saskatchewan, in the southwestern United States, in Tanzania and in other parts of the world.
- The recent period of helium shortage appears to be over, and the world could be entering a period of sustained ample supply.
The U.S. Bureau of Land Management operates a helium storage reservoir, enrichment plant and pipeline system near Amarillo, Texas. According to the BLM, this Federal Helium System has been supplying more than 40 percent of domestic demand.
The Helium Stewardship Act of 2013 essentially required the federal government to get out of the helium business, mandating the BLM to dispose of the helium reserve and facilities “not later than Sept. 30, 2021.” As this winddown proceeds, the BLM has taken steps to transfer the helium assets for sale by then.
“Any excess helium and helium assets remaining on that date will be transferred to the General Services Administration, which will follow its statutory disposal process,” the BLM announced in an April release.
“Federal In-Kind users will continue to have access to helium until Sept. 30, 2022, while the GSA completes their disposal process. This will also allow the BLM to continue operations until such time as all privately-owned helium is produced from the field (about 2023),” it reported.
Shortages and Surplus
According to Phil Kornbluth of Kornbluth Helium Consulting LLC in Bridgewater, N.J., a leading helium expert, the world has seen three periods of sustained helium shortage since 2006.
“The world is kind of conditioned to think, ‘Every time I turn around, there’s a helium shortage.’ That period of unreliable supply and recurring shortages is probably winding down,” he said.
A decline in helium demand because of COVID-19 appears to have ended the latest shortage, Kornbluth noted, interrupting or slowing many activities that use helium.
“You now have 10 percent more than you need, instead of 10 percent less than your need. Demand may have fallen more than 20 percent. It probably hit bottom in April or early May and has started to recover,” he said.
Global Helium Market
Helium generally has a stable and important world market. While many people think of helium balloons as an end-use, the largest U.S. use is for health care, principally in magnetic resonance imaging, accounting for about 30 percent of domestic demand.
According to the U.S. Geological Survey, which keeps annual statistics on helium reserves, production and consumption, other domestic helium uses were lifting gas (17 percent), analytical and laboratory applications (14 percent), inert gas in use welding (9 percent), and engineering and scientific applications (6 percent).
Helium is important in many other applications, including superconductors, thermographic cameras and imaging, liquid-fuel rockets, titanium and zirconium production, leak detection and eye-surgery lasers, according to the BLM.
Because helium is a critical resource, other parts of the world outside North America are ramping up production. New or expanded projects in Algeria and Qatar could add 200 million and 425 million standard cubic feet, respectively, to world helium capacity by 2021, Kornbluth said.
“Next year, production is expected to commence from a very large Gazprom project in Russia called the Amur project,” he noted.
Plans now call for ramping up Amur capacity to 2.1 billion cubic feet in three equal stages during the 2021-24 timeframe.
“That would represent about a third of the world’s current helium supply, so it’s a very significant increase in supply,” Kornbluth said.
“They actually will be separating out a lot more helium than they will be purifying and liquefying, and injecting it back into the ground for future production,” he added.
The United States remains the world’s largest helium producer with an estimated 68 million cubic meters extracted from natural gas production in 2019, according to the USGS. Qatar was the second-largest producer at 51 mcm, it reported.
North America offers several advantages for developing helium supply, Kornbluth observed. Those include low political risk, the United States as the world’s single biggest helium market and abundant liquefaction capacity.
“If somebody produces gaseous helium in the United States, there’s a lot of room for refining and, especially, liquefaction. Even when supply becomes ample, there should be considerable interest in developing domestic supply, and supply in Canada,” Kornbluth said.
For the near future, the world appears to be headed toward a period of more ample and reliable helium supply, he said. And in helium pricing, the up, up and away seen in recent years seems unlikely to continue.