Helium
“Assumed annual demand growth of 1.5% will continue to put pressure on the supply/demand balance in the longer term and should support prices, motivating further development and helium exploration.
If the mega projects are delayed (very possible), the picture could deteriorate further, pushing the market into substantial deficit.” – Wil Forbes, Oil & Gas Analyst.
Where is the world’s helium produced?
The world’s helium is extracted by 20 liquefaction plants located in the US, Poland, Russia, Algeria, Qatar, China and Australia. Qatar produces an estimated 25% of the global helium supply, which was traditionally exported from the United Arab Emirates via Saudi Arabia.
Algeria is the second-largest producer of helium, with 60% of its helium extracted out of the Hassi R’Mel field. Russia is the third. The US is also a key helium producer with the Hugoton field extracting nearly 27 trillion cubic feet of helium in its lifetime.
Have Qatari sanctions affected the helium supply?
Disruption caused by Saudi trade sanctions lasted three weeks as the Qatari helium plants stopped extraction, removing an estimated 120 container loads of helium from the global supply and causing significant disruption.
New routes have now been put into place through ports in Oman and the effect of the sanctions seems minimal. But these new routes are expensive and might in the long term increase the price of Qatari helium.
How does the US strategic reserve sell-off affect the market?
The US government is about to complete its sale of the BLM strategic helium reserve,and will see its helium stockpiles depleted by 2021.
The depletion of the US reserve might signal the end of an artificially low helium price, kept low by the well-publicised sale of the reserve – a sale that gave mid/downstream companies a reliable supply of helium over the past 10 years.
Why is helium supply sensitive to shock?
Of the 20 helium plants in operation, only five supply 80% of the world’s helium.
This results in slowdowns from one of these five plants having a severe impact on the global supply, making the supply chain for helium sensitive to shock.
Shocks to the supply chain are exacerbated by the poor transparency of helium plants, which rarely report outages on a timely basis, as well as estimates on key variables such as helium concentration, productive capacity or timelines for expansion varying between two forecasters for the same facility.
Will new supplies of helium offset market pressures?
New helium production projects will start to see outflow in the mid term, but these projects are unlikely to mitigate the shortage of helium over the next few years.
Qatar’s Helium III project, located in its Barzan facility, would have helped offset the decline in helium production if it had come online as planned in 2018. Unfortunately, issues upstream mean that the project has been delayed.
The massive Russian Amur facility is another production plant that could ensure a steady supply of helium. But it will not be operational until 2021 and, given the scope of the project and the historical delays associated with similar-sized projects, it is likely to be delayed as well.
Even the Amur and Qatari fields might not mitigate a shortage of helium over the long term, if growth rates reach a high rate of 3% over the next 10 years.
What effect will the undersupply of helium have on the global market?
The likely result of an undersupply of helium is that companies that depend on the gas will find replacements for the resource when they can.
Substitutes to helium can be used to cool MRI magnets, which accounts for 20% of the global helium demand.
Replacements are also available for welding, which represents 14% of global demand, superconductors (4%), breathing apparatus (3%) and purging gases (6%).
The undersupply of helium is therefore unlikely to affect the global market substantially, although some industries might suffer the costs of expensive alternatives to helium.
How will an undersupply affect the helium market?
It is difficult to predict the effect of an undersupply of helium on the market. Historically, the 2011–13 helium shortage saw prices spike and the market shrink, as companies responded to the high price of helium by finding substitutes for the gas.
Consequently, the US helium demand declined by 30% and had not rebounded back to 2013 levels by 2015, even though supply had recovered. This suggests a level of permanent demand destruction, as industries switched away from helium or became more efficient with supplies.
What is the current price of helium?
Data on current prices are not widely disclosed, creating uncertainty around exact estimates. For years, the only accurate source of helium pricing was the US strategic reserve.
It is important to note that the selling-off of the reserve makes the BLM prices increasingly less informative, given that the auction will end shortly.
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