Nice article on helium - and BNL gets a great mention.
Helium is exploding onto the scene again. Here's why Shortage 4.0 is different - *Helium is exploding onto the scene again. Here’swhy Shortage 4.0 is different
Helium hasa chequered history. It’s lifted us up, made us laugh – and made us cry – yetcrucially it’s intrinsic to our technological advancements.
Supply istight at the moment. They’re calling it ‘Helium shortage 4.0’ –the fourth time since 2006 that the world has experienced supply shortages thathave been largely due to external geopolitical forces, production faults, orplanned maintenance shutdowns from major producers such as Russia, the US andQatar.
Theseshortages have caused project delays for researchers and sectors who arereliant on the element as notedrecently by scholars at Harvard University.
Theculprits are varied. A ramp-up in production from Gazprom’s Amur plant inEastern Siberia was stalled by two gas plant fires in late 2021 and early 2022,sending supply shockwaves across a range of sectors.
Otherimpacts last year were the shutdown of the US Bureau of Land Management’s crudehelium production unit from January to June and Algeria was forced to shut downits Arzew plant to supply natural gas to Europe – a geopolitical consequence ofthe war in Ukraine.
Heliumsupply was already constrained before this whole shemozzle, because in 2017Qatar had to shut down two of its helium plants due to an economic blockadeimposed by Saudia Arabia. And get this: Qatar is also closing down its RasLaffan facility for maintenance this year. Bonkers.
Because ofthis circus, the helium market is reported to register a conservative compoundannual growth rate (CAGR) of greater than 4% across the period between 2017 and2027 as these major producers eventually get their mojo back.
This isgood news for startups in the helium biz, but it’s not new news either:
Analystsforecast the global helium market size will grow from US$4.45 billion last yearto US$6.48 billion by 2027 – but Kornbluth Helium Consulting founder andpresident Phil Kornbluth says it’s likely currently closer to a US$6-7 billiona year market right now because of the opaqueness of major producers notsharing material information at the macro level.
“I don’tbelieve prices will go up as much in 2023 (as they did in 2022), but when Amurbegins to sustain material production, prices would be expected to moderate,”Kornbluth said.
“There’squite a lot of uncertainty between now and 2027, a lot of activity aimed atdeveloping new sources and it’s a great time for a start-up to be producinghelium and earn a nice return, if they can get into production.”
When itcomes to how quickly prices come down and by how much, he points to the factthat in the past when shortages are followed by oversupply, the industrytypically held on to about half of the price increase they got on the way up.
Companiessuch as Blue Star Helium(ASX:BNL) are on a voyage to become one of the first ASX-listed pure-play helium producers, with advanced wells in Colorado.
There’s also Grand GulfEnergy (ASX:GGE) plugging away at its Red Helium project in Utah, while Noble Helium(ASX:NHE) is over in Africa planning its first drilling campaign at North Rukwa, Tanzania, this quarter.
We’ll get to them. But first, let’s raise some facts
The onlyelement in the periodical table that physically leaves the planet, helium isparadoxically also used in our technological ability to travel into space.
That alsomeans helium is finite – mined from trapped pockets deep under the surfacethrough the chemical decay of radioactive bullies such as uranium and thorium.
And if youhappen to remember your ’80s cartoons, Alvin and the Chipmunks once popularisedhelium to the point where rubber balloon costs had inflated to astronomicallevels.
This timearound, much of the demand has to do with helium’s ability to liquefy at just4.2 degrees Kelvin (−452.1F), which is a huge benefit to scientific andlaboratory processes that require super cold temperatures.
So, apartfrom the party balloon racket and The Chipmunks’ propensity to popularise theirdemand by sucking the life out of the party, helium also has historic and insanelyrelevant uses in nuclear energy production, solar panels, optic fibreand the cooling of superconducting magnets in MRI scanning machines and more –all vital tools for their respective sectors.
Helium is used as acooling agent in MRI machines. Pic via J.R. Campbell & Associates.
Laugh allyou want, but helium is again scarce, and analysts for a while have seen thatsupply constraints are only pushing prices higher.
Let’s lookat how it all began.
History
At thesame time WWI was making its presence known, US scientists were discoveringhuge helium deposits in Kansas, then weaponising the element to float balloonspacked with bombs in ‘dirigibles’ that caused carnage and often crashed soonafter.
The US wasadamant that helium would be vital to end the Great War, so it nationalised,extracted and stockpiled it for the war effort, only for the war itself to endbefore it could be utilised.
“If the war had lasted until next spring, the British and AmericanGovernments would have sent helium-filled rigid airships over strategic pointsin Germany, each capable of dropping a ‘total of 10 tonnes or more of highexplosives.” – Franklin D. Roosevelt.
The Yanks had the supply chain in place, so they continued to control theworld’s helium, searching for its uses but not finding much to do with it –which was pretty unfortunate for those aboard the hydrogen-filled Zeppelins theGermans built.
In early20th-century balloon circles, hydrogen ended up being a teeny-tiny bit toocombustible; as was found out when the British used incendiary bullets to shootdown the war-mongering Zeppelins.
Unfortunatelyfor many, commercial operations across Europe kept using hydrogen-filledpassenger aircraft to float from destination to destination, until…
“Oh, it’scrashing . . . oh, four or five hundred feet into the sky, and it’s a terrificcrash, ladies and gentlemen. There’s smoke, and there’s flames, now, and theframe is crashing to the ground, not quite to the mooring mast. Oh, thehumanity, and all the passengers screaming around here!” – Herb Morrison, Hindenburg disaster reporter, 1937.
Hydrogen-filledballoons had sung their swan song that year, but rather than disappearing intothin air like our guy helium does all the time, hydrogen’s destructive streakreared its ugly head once again in the Marshall Islands in 1952, exploding 500times more powerfully than the atom bomb dropped on Nagasaki in WW2.
Thecelebrated aspects of hydrogen were tarnished.
With theUS still holding its noble helium cache and trying to find ways to make itproductive in the post-war era, it allowed the element to grow into the keyingredient it is today for a plethora of vital industrial and technologicaluses.
Who on the ASX is into helium?
Back ontothe ASX and Grand GulfEnergy (ASX:GGE) has just assessed its McCracken prospect and generated a gross P50 helium resource of 1.8 billion cubic feet (BCF) (1.3 BCF net to incorporated JV company – Valence Resources), which complements the developments of its Jesse-1A, Jesse-2 and Jesse-3 wells in the Four Corners Area of its Red Helium project, Utah.
Thisbrings the P50 total for Red Helium to 12.7 BCF.
“TheDevonian McCracken sandstone is a proven producing helium formation in theregion, and the P50 prospective resource booking of almost 2 BCF at a grosslevel and 5 BCF at a field level represents a highly prospective bonusformation with significant upside that Grand Gulf will target at the Red Heliumproject,” GGE MD Dane Lance said.
Thenthere’s Noble Helium(ASX:NHE) progressing its North Rukwa project, remaining on track to drill its first wells in Q3 2023.
The twowells will target structures with a combined mean Prospective Helium Resourceof
16.5Bcf within the East African Rift System. Both wells are Basin Margin FaultClosure (BMFC) plays.
To date,BMFC plays have a proven 100% discovery rate from 14/14 oil and gas explorationwells in other basins of the East African Rift System in Uganda and Kenya.
Yet perhapsthe nearest towards production is Blue Star Helium(ASX:BNL) which is fast-tracking the commercialisation of its Colorado helium asset Voyager and the bigger but less developed Galactica/Pegasus wells.
Thecompany is eyeing first production sometime towards the end of this year andhas will have access to a helium recovery unit (HRU).
It recently shookhands with US-based midstream gas provider IACX Energy at the end for the latter to provide helium recovery services, via the delivery and operation of an initial HRU at Voyager – with Blue Star to provide secure access to the facility and deliver the raw gas to the inlet in exchange for a monthly stipend.
Nameplateraw gas throughput is aimed at 2 MMcf/dau to produce a 98+% purity heliumproduct gas. Nice numbers.
Targetedhelium production based on an average of 8% helium in the raw gas is expectedto be ~38 MMcf net to Blue Star in its first full-capacity year.
Forecasttotal field and plant operating costs also look highly attractive, coming in at~US$100-120/Mcf of helium product gas (at full capacity).
“As wellas delivering significant de-risking benefits in terms of upfront capital, timeand operating profile, adopting this pathway has also eliminated anyrequirement for Blue Star to commit to price concession offtake agreements,”BNL MD and CEO Trent Spry says.
“Now wecan target the premium pricing available in short-term US contract markets andspot sales, with current pricing estimates understood to be running at US$450–$3,000/Mcffor 98 to 99.999% purity helium.
“The plantto be supplied at Voyager can be readily expanded via the addition of a modularmembrane unit or addition of a second PSA plant to increase helium output inthe future, as well as to accommodate additional high He-concentration raw gasfrom surrounding discoveries.”
Up, up and away!
Voyager’sfacility is planned to start up on site-generated power before eventuallytransitioning to grid power.
BNL haspermitted two wells there for drilling and is currently seeking additionalpermits for a further four initial phase wells.
Productionwell drilling at Voyager is set to commence during August, with pressure andflow testing to be undertaken post-drilling.
IACXexpects to install and commission the facility during Q4 CY2023, subject toreceipt of all necessary permits, surface use and access agreements.
BlueStar’s planned Galactica/Pegasus development is a larger-scale and longer-datedproject compared to Blue Star’s maiden Voyager project, with multiple potentialproduct streams.
Well flowrate, production and ultimate recovery profiles have been completed for theproject, and the near-term start up of Voyager will put the company in a prettydecent position to fund well development.
Furtherengineering and market work is underway to refine the initial and expandedplanned development configuration and forecast helium and potential CO2production and cost estimates.
Thecompany has a range of development pathways under consideration for itsGalactica/Pegasus plays; including an initial leased plant and third-partyoperated option, with a final development decision expected to potentiallyinclude a CO2 by-product stream.