Helium Lifts Resource Sector

Commentary, Economy, Lee Harding

Necessity is the mother of invention. After 35 years in oil and gas, Marlon McDougall was frustrated with the pressures of regulations, environmentalism, pipeline restrictions, and the need for expensive technologies as more easily accessible reserves were depleted. Then in 2019, he was approached to work with what’s been called “the new oil”: helium.

Now McDougall enjoys an office in Calgary as the president and chief operating officer of North American Helium. The current prospects for helium remind him of the exciting times he had with oil exploration in the 1980’s.

“You do things right,” he told the Canadian Press. “You have an idea, you capture land, you shoot seismic, you go out and drill exploration wells, you make discoveries and it just rolls on from there.”

Helium is second only to hydrogen as the most common element in the universe, forming 23 percent of all matter. Yet this element, produced by the decay of radioactive thorium and uranium, is rare on earth. In the right conditions, the gas gets trapped deep in sedimentary rock. Saskatchewan had commercial helium wells in the 1960s and 1970s until falling prices led them to cease.

Until recent years, helium demand was confined to the military, weather balloons, and party balloons. Technological advancement has increased demand. 

“For me, it’s essential,” John Beamish, a physics professor at the University of Alberta, told the CBC last year. Beamish uses the liquified helium to study the fundamental properties of materials. His department uses up to 30,000 litres of liquid helium annually.

“I have to do measurements at temperatures below 1/10th of a degree above absolute zero and there’s really no other way to get to those temperatures except with liquid helium.”

Helium’s invaluable use as a cooling agent makes it essential for superconducting magnets in MRIs, rocketry, aerospace, plasma welding, fibre optics production, cryogenics, particle accelerators, and nuclear fusion research. It’s also used in barcode scanners and to treat some respiratory conditions.

In 2015, the U.S. government decided to sell off its strategic reserves over a six-year span and turn the market over to the private sector. The U.S. supplies 40 percent of global demand but consumes 30 percent. Canada can fill the gap as American wells decline.

About 97 percent of the world’s helium is produced as a byproduct of natural gas or LNG production. As of April 2019, there were only 14 liquid helium plants in the world. Qatar produces 32 percent of global supply and is expected to open its third plant in 2020.

Five companies account for more than three-quarters of the global helium market. This consolidation means that maintenance outages, delays, and unforeseen problems occasionally create a dramatic drop in supply. This has happened three times since 2006, causing helium prices to temporarily double and retail price of helium tanks to triple.

Western Canada is an ideal source for helium because its best reserves are found in pools that are 95 percent nitrogen, with trace amounts of methane and carbon dioxide. These can be vented to the atmosphere with minimal environmental impact while the remaining one or two percent of helium is extracted. Some helium is buried in wells deeper than two kilometres, but its high pressure means a well can be productive long after more shallow ones cease.

“The concentration of Saskatchewan helium is much higher than that drawn from LNG so it’s a more efficient source,” says Melinda Yurkowski, assistant chief geologist of petroleum geology at the Saskatchewan Geological Survey. “As well, some of the countries that produce a lot of LNG suffer from political instability which makes Saskatchewan a more attractive place to do business.” 

Saskatchewan has issued nearly 300 permits and leases for helium extraction, with roughly 100 coming in the past year. These cover 1.7 million hectares. North American Helium is the most active of the companies, having drilled 13 new wells. Its five-year plan includes wells, separation plants, and liquefaction facilities to help meet the global demand that is currently 7 billion cubic feet per year.

Weil Group Resources, based in Virginia, reactivated two legacy wells in Saskatchewan in 2016. It also built a $10 million helium separation plant near the town of Mankota that can process 40 million cubic feet annually. The company plans to expand operations to Alberta and build a liquefaction facility there to ship helium in high-pressure tanks.

“The industry is still in its infancy,” Yurkowski says, “so it would be hard to say what the job potential will be. As in any booming resource sector, the sky’s the limit.”

What else could we expect from the lightest and coolest element?

 

 

Lee Harding is a Research Associate with the Frontier Centre for Public Policy.