Nice article on helium - mentions BNL.It’s rare, pricey and...

Nice article on helium - mentions BNL.

It’s rare, pricey and irreplaceable; here’s why helium’s... ON THE RISE - *

It’s rare, pricey and irreplaceable; here’s whyhelium’s… ON THE RISE

Energy

• Global helium supply has tightened due to a combination of factors while demand continues to grow
• Despite its high cost, helium makes up a relatively small part of the total cost of applications it is used for
• Preference for domestic supply unlikely compared to other critical commodities due to the scarcity – particularly for natural occurring helium

Helium isa famously scarce yet highly valued commodity that is irreplaceable for themany high tech applications that it is used for.

It is usedin semiconductor manufacturing, nuclear energy production, solar panels, opticfibre and the cooling of superconducting magnets in MRI scanning machines.

Demand isalso growing with the market expected to grow from an estimated US$5bn in 2023to over US$8bn in 2030.

Speakingto *, Noble Helium(ASX:NHE) managing director Shuan Scott said the helium market is quite interesting and dynamic at the moment with some structural changes happening.

“Some ofthose contracting supply from Russian had basically cancelled those contractsdue to what is going on there and are now revising where they are,” he said.

“As a goodexample of how the Ukraine situation has disrupted helium supply, Algeria,which had two big LNG plants that supplied about 8% of the world’s heliumsupply, is now feeding gas straight into the pipeline network into Europe.

“This hasled to one of the plants being bypassed entirely and 4% of the world’s heliumsupply disappearing overnight.

“All thebig industrial companies are now looking around for alternative sources ofsupply due to geopolitical risk or not linked to production of oil and gas.”

Most ofthe world’s helium is currently produced as a by-product of gas production –particularly LNG where helium is concentrated to a point where it can beextracted separately from the liquefied natural gas.

Locally,the temporary closure of the Darwin LNG plant has led BOC to shut its heliumplant in Darwin.

Pricing staying stable

The supplyshocks have impacted on short-term contract and spot prices, which currentlyrange between US$650-3,500 per thousand cubic feet (Mcf).

Longer-termcontracts have been renewed at the current level of between US$400-500/Mcf.

“On thepricing side of things, we work with Phil Kornbluth of Kornbluth HeliumConsulting, a US market expert on helium, who is pretty much involved in everytransaction that goes on, so we get an update every month,” he added.

Scottpointed out that this pricing is for Tier 1 contracts with major companieswhile Tier 2 contracts, which are for smaller volumes and are typically solddirect to the customer or smaller players, normally trade at a premium to Tier1 prices.

“Theadvice that we have been getting is that the big industrial gas guys, once theprice gets to a level, they are pretty good at hanging on to it. So we are notexpecting to see any significant downward revision in pricing,” he added.

“While theprice per unit is high, the actual price when you look at the total as an inputcost is relatively small as not much helium is actually used in eachapplication. It is a relatively small part of the actual cost profile.

“Takesemiconductors for example, they represent about US$1bn of the current heliumwholesale market, but that’s a drop in the ocean of the multi-trillion dollarsemiconductor industry.

“So theelement of cost is non-elastic, because without it, the cost is way more.

“Theunique thing about helium is that in all the applications, MRI, semiconductors,etc, it is critical, without it, you can’t operate, so the consumers just payit. It is quite an interesting dynamic.”

Helium is used in themanufacture of semiconductors, which include computer chips. Pic: Getty Images

Can’t afford to be choosy

Outside ofproducing helium as a natural gas/LNG by-product, reservoirs with significantamounts of helium are a rarity, meaning that potential buyers can’t afford tobe choosy about where the gas comes from.

“I thinkhelium is a little bit apart compared to something like lithium, rare earths orwhat have you,” Scott noted.

“Thosedeposits exist in multiple places all over the world, so there probably is somepotential for preferring domestic resources first, but that is simply notfeasible for helium.”

He notesthat while NHE is still in the early stages of exploration for its North Rukwaproject in Tanzania, the data from the few wells it has already drilled haveproved that the reservoir is unique and simply doesn’t exist anywhere else.

“Thehelium is just mixed with nitrogen, there’s no significant amounts of CO2 orhydrocarbons, which is very simple to separate,” he said adding that thecompany is currently focused on the gas cap, which has proven to be some sixtimes larger than originally mapped.

“Our planwould be to during the next dry season, which is June to September kind of timeframe, we will go in with some low cost drill equipment and basically test it.

“What wewant to do is bring a sample to surface that we can analyse and also to flow itto see what kind of flow rates we can get from the reservoir.

“Thosefactors will obviously move us closer to our strategy because in parallel weare talking to offtakers.”

Developmentcosts are expected to be very low due to the gas composition as well as theshallow nature of the reservoir – just 85m from the surface – with minimal tono land access issues.

“On thedownstream processing side, potential offtake partners we have spoken to areall offering funding, are all offering to pay for that,” Scott added.

“Then whatwill happen as we sold helium, the price will just be adjusted to return theircapital.”

ASX players on the helium trail

While NHEhas enjoyed significant success with its North Rukwa project, it is far frombeing the only ASX company that is hunting for helium deposits or which hasenjoyed success on that front.

Blue Star Helium(ASX:BNL)

Withpotential development of its Galactica/Pegasus project in Coloradosignificantly de-risked by successful third-party commercialisation ofadjoining Red Rocks helium project, Blue Star Helium is preparing to drill itsmaiden development well in the current quarter.

Explorationdrilling at the project has already proved remarkably successful, with fourwells flowing between 125,000-412,000 cubic feet of gas each with highair-corrected helium concentrations of 2-6.1%.

A numberof development pathways are currently under consideration including a leasedprocessing plant and third-party operated option.

BNL notedthat the final development is expected to include a CO2 extraction route andby-product stream.

Buru Energy(ASX:BRU)

While BuruEnergy is focused on its conventional oil and gas assets in the Canning Basin,Western Australia, its wholly-owned subsidiary 2H Resources is exploring fornatural hydrogen and associated helium over a 30,000km2 package of ground inSouth Australia.

This waschosen due to South Australia having the regulatory framework in place fornatural hydrogen exploration.

2HResources has also applied for six special prospecting authorities in WesternAustralia, four in a 75:25 partnership with Gehyra Flux covering ~20,000km2northwest of Perth adjacent to the margins of the Perth Basin and two in theGoldfields region between Norseman and Kalgoorlie.

ConstellationResources (ASX:CR1)

Magmaticnickel sulphide explorer Constellation Resources is diversifying its portfolio,applying for six special prospecting authorities covering 56,192km2 in theEdmond-Collier and Yerrida basins of Western Australia that are prospective forhelium and associated gases.

Thegeological terrains within these areas contain high heat-producing radiometricgranites and greenstone basement units that are prospective source-rocks forongoing helium and associated gas generation.

Equallyimportantly, these units are overlain by a folded sedimentary basin sequencethat could contain potential seals and reservoirs which can both trap andcontain helium.

Gold Hydrogen(ASX:GHY)

Whilefocused primarily on natural hydrogen, Gold Hydrogen’s Ramsay-1 and Ramsay-2exploration wells in South Australia have also intersected significant amountsof helium.

Preliminarygas samples have returned helium concentrations of up to 17.5%, which lendssupport to its best estimate prospective resource estimate of 41Bcf of heliumin PEL 687.

Grand GulfEnergy (ASX:GGE)

Followinga successful flow of raw gas with significant concentrations of helium at arate of 1 million cubic feet (MMcf) per day from its Jesse-1A well at the RedHelium project in Utah’s Paradox Basin, Grand Gulf is now planning to sidetrackthe well.

Thissidetrack will seek to achieve effective isolation of the different zones,allowing the company to optimise production from the primary Leadvilleformation as well as testing deeper helium producing formations including thehighly prospective Devonian McCracken sandstone.

Acidsolubility testing results have also indicated that Leadville is amendable toacid stimulation, which could increase flow rates by both removing wellboredamage and connecting the wellbore to near-wellbore hydrothermal dolomiticporosity.

The RedHelium project is geologically analogous to Doe Canyon about 25km to the eastthat currently produces about 10.7MMcf of helium per month.

Greenvale Energy(ASX:GRV)

GreenvaleEnergy is focused on progressing its flagship Alpha Torbanite project but it isalso in the process of farming into EP 145 in the Amadeus Basin which sitswithin recognised play fairways for helium and hydrogen and contains provenhydrocarbon discoveries.

It hostsan existing best estimate prospective resource of 440 billion cubic feet ofnatural gas, 26.4Bcf of helium and 26.4Bcf of hydrogen and is on trend with theproducing Mereenie oil and gas field.

GRV hasalready paid the transfer fee under the agreement to earn a 75% interest in EP145 and ministerial approval is expected soon before completion on 30 April2024.

Preparationsare underway for a seismic program that will be completed in August 2024 toguide targeting for drilling in 2025.