Special thanks to Phil Kornbluth, President of Kornbluth Helium Consulting (KHC) for his contribution
From time to time, helium has received increased visibility in the B2B press due to product shortages. However, over the last 3-5 years the press has become more mainstream due to the same supply-demand challenges, as well as the effects on critical end markets such as semiconductor chip manufacturing, magnetic resonance imaging (MRI) or the aerospace industry.
For years this was never the case for helium, in fact it was essentially unknown before the twentieth century. Although it was first detected during a solar eclipse in the late 1860s, it was not until the early 1900s that it started garnering more interest, when it was found in natural gas wells in the US. From that point forward, helium’s profile gradually grew as it became more plentiful and more applications for this unique gas were developed such as lifting gas, leak detection, shield arc welding, and leveraging the cryogenic properties of liquid helium for superconducting and healthcare applications such as MRI. Consequently, other regions of the world with helium-rich natural gas wells began producing helium including Poland, Algeria, Qatar, Russia, Australia, and others.
Today, because of strategic decisions over the recent decades (for example US government privatisation and an announced exit from the helium industry) and increased investment in liquefied natural gas (LNG) and helium recovery around the world, the landscape has changed dramatically. This article looks at helium’s past, the current state of the helium industry, and what the future holds for this unique commodity.
When one examines helium’s past, a few big themes come to mind. The US’ role in the birth of the industry; key applications like MRI that helped globalise helium demand; recurring supply-demand challenges (shortages); and the rise of non-US sources for helium. In the early 1900s when helium was discovered in massive quantities in natural gas wells in the mid-continental US, it was initially used during world War 1 (WWI) to replace the highly explosive hydrogen as the lift gas utilised to inflate military dirigibles and balloons. Consequently, the supply of helium was pulled under the auspices of the US military, and it built the first experimental and commercial-scale helium extraction plants in Texas. In fact, the Helium Act of 1925 banned the export of helium, for which the US was the only important source, thus forcing foreign airships to use hydrogen as a lift gas. Over the years, investment continued, the assets were shifted out of the military’s purview, and the US controlled nearly all of the world’s helium supply.
However, after a few decades of production, by the 1960s the existing sources were becoming partially depleted. So, the US government began to encourage private plants to be built for the extraction of helium from natural gas, which gradually began the journey toward privatisation of the industry. The Helium Act Amendments of 1960 resulted in the construction of five natural gas plants, adding helium extraction facilities within the largest region of helium-rich natural gas (Hugoton Field), as well as a 425-mile pipeline (BLM Pipeline) to function as a gathering system for the new extraction plants to transport crude helium to the main storage facility (Cliffside) located near Amarillo, Texas. Eventually, private industry built a half dozen or so of helium purification and liquefaction plants connected to the BLM Pipeline.
These private refining facilities enabled the industry to utilise the Cliffside facility as a ‘flywheel’ – allowing them access to the pipeline to both store their crude helium in the Cliffside facility as well as remove and refine it, as needed. Over the next two decades, the US, Poland and Russia added helium production capacity, and significant applications for helium were developed that created unprecedented demand growth. MRI scanners were developed which generated images of the human body and required liquid helium (LHe) to cool down the enclosed superconducting magnets; space exploration and superconductivity research utilised its cryogenic and cooling properties; and optical fibre manufacturing benefitted by using helium to cool the fibre more efficiently during production. The electronics industry also developed uses for helium in chip production. These applications, along with others, contributed to double-digit growth and were catalysts for expansion of the global helium supply chain.
These applications contributed to double-digit growth and were catalysts for expansion of the global supply chain…
By 1995, more than 35 billion cubic feet of raw helium had been stored in the US at the Cliffside reserve, however, the operation had created a debt of $1.4bn. During a period when there were initiatives to downsize the Federal government, the US Congress passed the Helium Privatisation Act (HPA) of 1996, which directed the US Department of the Interior to dispose of the helium in the reserve via crude helium sales, with the objective to use the proceeds to pay off the programme’s indebtedness.
In the 1980s, 1990s and 2000s, additional helium capacity came on stream from Algeria, Qatar, Australia and in the US (via ExxonMobil), complimenting LNG expansion strategies, and partially offsetting the supply gap created as the US government continued winding down its participation in the helium market. In 2006 through 2007, the helium market experienced its first sustained product shortage coined ‘Helium Shortage 1.0’, which ended as the result of Qatar-1 reaching full production (700 MMscf/yr). The start-up of Algeria’s second plant in Skikda (600 MMscf/yr) unfortunately was impacted by a major explosion at the Skikda site, reducing its supply capability.
A second shortage materialized (Helium Shortage 2.0) in the 2011-2013 timeframe and was ended when Qatar’s second helium plant (1,400 MMscf/ yr of pure helium) came on-stream in late 2012. At that point, the new Skikda LNG train also commenced operation. This second shortage drove prices up to a point where it started to become economically feasible for companies to explore for and extract helium on its own merits, independent of any LNG or natural gas processing investment. Since then, helium exploration start-up companies began to enter the helium market.
In October 2013, the US government finalized the decision and timeline to sell off the remainder of the Federal stockpile and other helium assets as part of the Helium Stewardship Act (HSA) of 2013. This legislation defined the roadmap which included continued operation of the Federal Helium Reserve and the Federal Helium Pipeline by the Bureau of Land Management (BLM), and offering crude helium for sale annually via an auction process. As the Federal stockpile was gradually depleted, the deliverable capacity from the BLM pipeline gradually continued to decline, reducing the effective capacity of the helium refining facilities linked to the pipeline.
Once the Federal Helium Stockpile was reduced to three billion standard cubic feet (scf), the BLM, would end commercial sales of crude helium and the stockpile would only be available to government users. The HSA also required the BLM to declare the government’s helium assets as excess property and transfer to the GSA for disposal, (including the remainder of the stockpile) by 30th September 2021.
The helium business has experienced tremendous change over the last 40 years, from a BLM-centric, US-centric business, where the US supplied greater than 90% of the world’s helium, to a more global business with production coming from eight different countries and the era of reliance on the BLM system winding down.Phil Kornbluth, President of Kornbluth Helium Consulting (KHC)
There are several topics that are currently top of mind for helium business leaders including addressing increased global supply chain challenges, the timing of product availability from the Gazprom and Qatar 3 start-ups, and the continued helium exploration activity around the world.
Most global supply chain executives in every industry have been fully aware of the growing port bottlenecks as their business volumes recover from Covid. A November 2021 ‘60-Minutes’ broadcast reported that the largest US port (Long Beach/Los Angeles), where 40% of imports enter the country, has been gradually getting more congested since the pandemic. The port had more than 80 ships in its harbor (the highest level ever) with some waiting weeks prior to unloading. It was taking nine days to get products off the dock (normally a two-day task), which together with other supply chain issues has caused shipping costs, especially on trans-Pacific routes, to rise from 4-10X over last year’s rates!
This data was mostly focused on the retail space, but the same issues are ‘rearing their ugly head’ in the industrial and helium spaces. The industry is awaiting regular supplies of helium from Gazprom’s Amur Gas Processing Plant (GPP) with the first of three helium separation, purification and liquefaction units, which will have an annual capacity of 700 MMscf/yr of helium each, producing its first helium in September. There is some coordination required to transport LHe from the Amur GPP 1,500km by truck to the Vladivostok Helium Hub and then the port for export. The investment in infrastructure, along with the port challenges being faced around the world, is causing some concern.
The other project that is currently ramping up production is Qatargas’ third helium plant (Qatar 3) which has an annual production capacity of 400 MMscf. As per the most recent helium supply data by country (see chart), the US is still the leading producer – but these two projects will reduce the gap significantly.
There is a great deal of uncertainty in the market as we enter 2022, as it is difficult to say how quickly production from Gazprom’s Amur Project will ramp up, when the second tranche from Amur will enter the market and how quickly Amur will become a reliable source. The answers to these questions will have a huge impact on the helium market in 2022 and beyond.Phil Kornbluth, President of Kornbluth Helium Consulting (KHC)
Another interesting trend has been the growth in the number of helium exploration companies since Helium Shortage 2.0. Some experts refer to this environment as a mini ‘Helium Rush’ since there are 30+ start-up companies, at least 15 of which have gone public and have secured financing for the near term. Western Canada, the Midwest/Southwest US, South Africa and Tanzania are the leading geographies for helium exploration with helium-rich discoveries containing low-mid single digit percentages of helium. However, very few are producing helium today (except for North American Helium, Tacitus, and Thor Resources to name a few) and, collectively, will have a modest impact on global supply-demand in the short to medium-term.
Looking forward, helium business leaders are focused on the supply/ demand impacts of new Russian and Qatar sources, the impact of the sale of the BLM’s helium assets, the lowering profile of helium in the US and the growth, impact and expected consolidation of the new helium exploration companies.
During 2022, significant supply will come online from the two projects previously discussed (Gazprom Amur and Qatar 3) which are expected to bring approximately 1,800 MMscf/yr into the market and ease the supplydemand balance. However, over the next 3-6 years, with the expected full ramp-up of Gazprom’s Amur project and the expected Qatar 4 project, these two countries alone could add approximately over 4,000 MMscf/yr to global helium supply.
By 2025, it is forecasted that the top three producing countries will supply nearly 90% of the world’s helium.Phil Kornbluth, President of Kornbluth Helium Consulting (KHC)
By 2025, it is forecasted that the top three producing countries will supply nearly 90% of the world’s helium. The split between the top players will be nearly equal (see adjacent chart). At this time, the marketplace is forecasted to have more than ample helium, potentially causing pricing to moderate, depending on demand. Although supply should be plentiful, lessons from the pandemic on how fragile global supply chains can become, may cause some helium suppliers and customers to prioritise local/regional helium sources to reduce exposure to geopolitical risk and ensure reliability of supply.
Global demand has been relatively flat in recent years. Over the same timeframe, the growth areas have clearly shifted towards Asia (China, India, South Korea, Taiwan) and even the Middle East. Modest growth continues to be driven by continued semiconductor/electronics, and aerospace applications. However, OEMs in the biggest market (MRI) have become more efficient in their helium usage with each new generation of scanner, with low helium and zero boil-off magnets on the market today.
As a result, the MRI market for helium has declined and will be surpassed by the semiconductor/ electronics segment within the next couple of years. This begs the question, what will be the next big use for helium? At the moment, the answer to that question is not clear… For the existing companies with BLM storage contracts who are anxiously waiting for the asset sales process to begin, they received more clarity on the status at gasworld’s Helium Super Summit in December. The GSA stated it was on schedule for delivering an RFQ to a qualified list of bidders by July 2022, and then expects to make an award 1-3 months afterwards. The BLM will then work with the GSA and the awarded party to begin the process of transferring possession of the assets, which will likely occur sometime in 2023.
As part of the BLM’s asset sale, the remaining government-owned helium in the Federal Helium Reserve will transition ownership to the awarded company, and the US government will be mandated to start procuring helium from other sources starting in October 2022. Even with this additional clarity, the scenario of most concern to some players is the sale to a single entity, who may change the commercial terms and potentially limit access to the ‘flywheel’ benefits to which they have become accustomed. In the near term, the focus of the existing companies (and all bidders) will be to ensure a fair and reasonable outcome of the sale with minimal market impact.
Although there are large helium supply plants coming on-stream in Russia, Qatar and even Algeria, it is expected that the helium exploration companies will carve-out a small but noticeable share of the helium market in the coming years. This segment is forecasted to account for between 5-10% of the global helium market by 2030, largely driven by the value-proposition of targeting the replacement of declining BLM supply in North America, offering geopolitically secure sources, and offering a much lower environmental footprint. Support from local governments like Saskatchewan province in Canada will help to accelerate the growth of these companies. This province has developed a formal helium strategy, offered investment incentives, lowered the cost of data and land acquisition, and streamlined permitting processes – making it easier for companies to do business and help the province achieve its ‘stated’ goal of capturing 10% share of the global helium market by 2030.
It will be very interesting to see which of the many helium production start-ups are ultimately successful. One thing is for certain, however, the number of companies trying to develop new helium production is unprecedented and the pipeline of new supply coming into the market should result in a more ample supply of helium during the 2020’s than we have experienced during the shortage-prone 2006- 2021 period.Phil Kornbluth, President of Kornbluth Helium Consulting (KHC)
The helium business is one of the more unique and complex businesses in the industrial gas portfolio. It features a truly global supply chain, experiences periodic supply-demand imbalances, its raw material supply (crude helium) is owned by ‘others’ and it supports a demanding and diverse set of customers with rising expectations. Despite all this, the business of helium continues to move forward and benefit many end-markets such as healthcare, semiconductors and aerospace, and is primed to grow as new supply comes into the market in the short to medium-term.
There is also a bit of a ‘changing of the guard’ as the dominance of US helium supply gradually diminishes, and countries such as Qatar and Russia join the US as the leading helium producers for the foreseeable future. In fact, the US government has ‘surprisingly’ made the decision to remove helium from its recently drafted ‘2021 Critical Minerals List’ which prioritises supply of these minerals due to their importance to national security and other key criteria. This decision is currently seeking public comment, with the final decision to be confirmed in early 2022.
Despite all that is going on in this business, the future is bright with regards to ample supply coming online over the short-medium-term. Most importantly, suppliers should be able to support customers better and more comfortably, while re-invigorating application development efforts to identify new areas and uses for this truly unique commodity. Stay tuned, in some respects, the best is yet to come.