The race to develop the most advanced quantum computers, the development of new rocket technology by companies like Space-Ex, and our industrial demand for semiconductors have brought a keen focus to helium demand globally.
However, as a resource, helium has the paradoxical distinction of being the second-most common element in the universe, while at the same time, being rare in concentration on earth.
In industry, helium is used in controlled environments because it is an inert gas. Helium and oxygen or Heliox- has applications to treat obstructive pulmonary disease, which in light of the effects of the Covid 19 virus has extremely interesting developing health applications. Helium is essential for cooling superconductors in advanced technology like MRI machines and quantum computers. In its gaseous form, it is of interest in new space technology just as it was critical to the Saturn 5 and Apollo missions to the moon. Helium is also used in scientific research and the manufacture of conventional electronics. Bitcoin mines, which generate a lot of heat are increasingly using liquid helium as a coolant.
However, in keeping with the paradoxical nature of helium, while it is common, it is a wholly nonrenewable resource. The global demand for helium for the tech and medical sectors has been greatly underestimated and since supply is located in very few countries (the United States, Algeria, Russia and Qatar and to a lesser extent Canada, Tanzania and South Africa) there is a global shortage of supply.
The development of helium as a commodity is complicated by its properties and by the fact that it is a geopolitical commodity and is affected by “economic rent”. By its nature, helium needs to be transported as a liquid and must be supercooled. In addition, it can’t be efficiently stored or transported around the world. It is difficult to keep helium in liquid form for longer than six weeks. Therefore, there is a need for the localization of a helium marketplace.
The history of helium as a geopolitical commodity is complicated. Famously, the first big helium deposits in the 1900s were located in the United States. The US National Helium Reserve blocked the sale of helium to Germany just before WW1 since helium had military applications for use in dirigibles. This led to companies like Luftschiffbau Zeppelin using highly flammable hydrogen in airships like the Hindenburg.
Flash forward to 2013, the United States was faced with an impending shortage of their helium resources (which are owned by the state). They enacted the Helium Stewardship Act which proscribed the end of sales of helium by 2020 to keep helium for government uses. The US Bureau of Land Management handled sales of helium and there is public data of prices right up until 2019. As the US stopped selling to the world, the helium market became opaque according to David Johnson, CEO, and Director of Imperial Helium and a Director for the Canadian Global Exploration Forum.
“Four main players evolved- controlling eighty-five percent of the global market essentially making it an oligopoly. Under the Helium Stewardship Act, the last public sale was held in 2018. Thereafter, the US took 2.1 billion cu ft off the market. Raw helium is now selling for ~ $350.00 per mcf. Refined helium is selling for $600-650.00 USD per mcf. Helium is now more than ever a low volume/high-value commodity.”
According to Johnson, because helium is sold in individual offtake contracts, prices are difficult to discern with some being published but most unpublished under NDAs. However, he has found data points pointing to prices of $600-650.00 USD per mcf for grade A helium indicating that the value in the market is now significant. Johnson thinks the price point will remain high, even with new streams coming on out of Qatar and Russia.
“Why would the companies that control the global market give up that economic rent? And why would the countries producing into that market want that economic rent to go away? The most compelling reason for price stability is that helium is a purchase and use product. It’s not something you can store in large volumes, like oil. It’s more like LNG, and the result is isolation or localization of markets because, like LNG, helium can’t be transported or stored as easily as oil can.”
Tony Cioni, co-founder of Cito Energy Group has perspective from his work with domestic and international helium plays and notes the impact of global forces:
“We expect the trend will be one of increasing foreign government involvement in helium markets. Russia is building the world’s largest helium extraction plant as part of its Amur project, and QatarGas is looking to expand its already intensive helium liquefaction operations.”
Alberta has an advantage for companies looking to producing helium as the Crown has data on where the helium-rich deposits are located in the WCSB. A good well in Alberta is 10 million cu ft a day and 1 % helium is a good concentration. 1% of 10 M is 100,000. At a very low price, helium would sell for $250 per 1000 cu ft. $250 x 100 is $25,000 in revenue a day. $9.1 M per year. A helium separator must be specially designed and custom-built for approximately $4M to handle 10mmcf of raw gas. So a good well could payout in half a year.
David Johnson points out that helium is a vital and yet non-renewable resource that is generated very slowly in terms of geologic time. Although helium is a high-value product, it is currently being treated as a waste product in Alberta and that value is not being captured. Albertans seem to be losing a sizeable quantity of helium revenue annually because helium is simply being vented to the atmosphere as part of a product classified as inert gases. The question remains, can we recognize that value is being lost and start to capture it?
It is encouraging that the Alberta government is taking the first steps and has established a royalty rate for helium since the lack of a royalty rate has been seen as a deterring companies from extracting it. The province of Saskatchewan has been ahead of Alberta in the development of helium extraction for commercial use, but that is about to change. Phil Skolnick, an analyst with Eight Capital has commented that “Western Canada can be a key supplier of helium,”, adding, “The resources in Alberta and Saskatchewan are environmentally favourable to many other sources around the world, given they are associated with nitrogen, which can be safely vented into the atmosphere.”
Regarding the venting of helium, David Johnson wonders…
“What is the best way forward? We don’t burn natural gas in flaring anymore because it is a waste. Maybe we shouldn’t be venting helium either? We can’t make everyone change overnight, but maybe over the next ten years, we could change. Helium is a critical resource that is essential for our future. Several Alberta companies have turned to capturing helium as a resource that has been bypassed. It is an important part of the industry and it is going to be pivotal for Alberta in the future.”
Maureen McCall is an energy professional who writes on issues affecting the energy industry