central's helium story

Long & winded post with my thoughts on Helium.

CTP's HE exploration & commercialisation seems imminent IMO & the timing is good, with BOC-Linde group opening up the nation's first HE processing plant in Darwin last week.

CTP has already got a partner in HEN Australia who have a 25% interest & will pay 50% of the drilling costs for M2 & MtK1.

As for the sale price, there r 2 options, since CTP is the producer, they might want to sell Crude HE which is priced at US$62/mcf. And then, HEN may b responsible for selling the final product to the market i.e Grade-A Helium, which sells for USD125-145/mcf these days. This will become clear when their independent experts reports comes out soon.

CTP have appointed Brisbane based METTS Infrastructure group to look into this. The only missing variable in my mind is the costs.

Question no one has asked is why is HE so costly then natural gas & what makes it so special?

Well for once it occurs with some natural gas deposits (not all gas fields have HE) & the cost of seperating it frm other impurities (N2, CO2, moisture etc), liquefaction & refrigeration of liquid HE, make it expensive & only a few operators in the world bother spending that a huge amount of money on HE extraction.

Helium is a noble gas & occurs in 5ppm concentration in the atmosphere & not radioactive byproduct, as someone mentioned in the previous post.

For now there r 3 operators dominant in HE separation, BOC-Linde, Air Products & L'Air Liquide & with just 1 plant in Oz, we wonder how the hospitals got thro' all this time (imports, naturally), so its not a laughing matter IMO. By the way next time someone gets a body scan at the airport or an MRI scan in hospise, think about HE, its used to cool the magnets within these expensive units.

As of now, cost of Helium is going up & its proven reserves are going down. Amarillo plant in Texas produces & meets 1/3rd of US annual demand & last year liquid helium was selling at US$6.60/litre, up frm US$4.80/litre, 2 years back.

In 2008, HE global consumption was 6.5 bcf up from 3.75 bcf in 1995 & its finding increasing use in physics & medicine fields, besides growing demand from Asia.

Proven reserves are in Qatar: 360 bcf, USA: 153 bcf, Russia & Algeria: ~63-68 bcf.

Here's a list of Helium field reserves in the USA:

Hugoton-Panhandle complex: 48 bcf
Riley Ridge (Wyoming- ExxonMobil's): 48 bcf
Rands Butte (WY): 17 bcf
St Johns, Arizona: 14 bcf
Others: 26 bcf
Total: 153 bcf

So thats the global scenario.

In CTP's case, the UGIIP for Magee is 15 bcf & Mt Kitty is 180 bcf.

Let's say this 195 bcf is discovered, then at 50% recovery rate, CTP-HEN can extract 97.5 bcf & CTP's 75% share of this will b 73 bcf, more then enough to meet the global demand for years (forecast at 6.5 bcf/yr).

At Magee-1 they had 6% HE shows whilst drilling. At M2, CTP are expecting 5% frm a 10 MMCFD gas flow. This should put them in the drivers seat.

We still need to know how much are the costs for an onsite separation, liquefaction & refrigeration unit besides trucking it to Alice or Darwin.

IMHO, it won't b $2.50/mcf more close to abt $20-30/mcf. I'd wait for METTS report to come out, b4 jumping to $20 shareprice.

4 they spud Magee#2 as part of their back2back 3 well program, one hopes Ooraminna#2 & Johnstone#1 would have set the stage, so perhaps mid-year I'd expect Patersons to perhaps re-rate CTP firstly for the CSG results & then for the rest.