Until
recently, the world’s seemingly abundant supply of helium was extracted
solely as a by-product of natural-gas production in just two dozen
helium-rich fields. But global helium production shortfalls have driven
double-digit inflation of helium prices and fueled rising anxiety in the
scientific community. Now, prospectors in the United States – the
world’s largest helium exporter – are exploring fields in search of
helium exclusively.
Helium shortages inevitably spur debate about production and preservation practices. Since the 1996 US Helium Privatization Act
(HPA) – which required the government to sell off its helium reserves
using a rigid price formula in order to repay the debt accrued from a
large helium buy-up in the 1960’s – there have been three such
shortfalls.
Given
that the HPA calls for helium sales to cease once the debt is paid –
that is, this October – the scientific, medical, and technology
communities have become increasingly concerned about a massive helium
shortage and ballooning costs. This, together with the fact that helium
underpins much US employment, may have contributed to the US Congress’s
recent efforts to keep one-third of the world’s helium supply flowing,
but at higher prices.
The
move is timely, because the mandated disposal of such a large volume of
helium from the US Federal Helium Reserve over the last 15 years has
displaced many helium producers in the American Midwest and deferred
projects elsewhere (see graph). Indeed, by artificially constraining
helium prices, the HPA weakened companies’ incentive to invest in
separating helium from natural gas. As a result, many thousands of
tonnes of helium have simply been vented into the atmosphere at source
or when the natural gas has been burned.
Ending
this lamentable squandering of helium requires a fundamental shift in
thinking in the natural-gas industry. As helium is a by-product of its
much larger energy counterpart, it is fair to say that helium that is
not used will not be preserved.
Today,
the upstream helium market is structurally weak. Helium-bearing
Hugoton, America’s largest natural-gas field, is in decline. And
sustaining the US Federal Helium Reserve’s high production capacity,
which used to enable it to offset global helium-supply disruptions, is
no longer geologically viable.
Moreover,
the rapid expansion in the US of shale gas, which contains no
economically recoverable helium, has squeezed marginal conventional-gas
supplies. For example, Oklahoma’s Keyes natural-gas field – which
relieved a major helium shortage just as the US government started
purchasing the gas from private producers during the space race – now
lies dormant. And helium extraction is not economical without
natural-gas production.
As
it stands, natural-gas companies have little incentive to adapt their
operations to enable helium extraction. In Algeria, a giant gas field,
the helium-rich Hassi R’Mel, is also a gas hub for the Sahara region.
Rich and lean streams are blended there. This reduces the helium
concentration and makes extraction difficult.
Clearly,
the problem is not insufficient helium, but the economic, legal, and
physical constraints on helium resources. In fact, Arizona alone has
enough helium to supply the US for a decade. But the St. John’s Dome
natural-gas field is dominated by CO2, which the Ridgeway Arizona Oil
Corporation aims to use to enhance oil-recovery projects in the area.
Given that the CO2 is not yet being produced and will not be vented, the
field’s helium remains inaccessible.
Despite
these challenges, the industrial gas companies are gaining access to
helium in low-grade gas sources. Although some producers – including
Exxon Mobil’s Shute Creek plant near La Barge, Wyoming (until 2013, home
to the world’s largest helium refinery) – once vented waste CO2 into
the atmosphere, they are now installing carbon-capture facilities to
reduce or eliminate emissions.
Moreover,
nitrogen – a gas that can be vented without consequences – always
coexists with helium. Coincidentally, the initial discovery of abundant
helium in the US in 1903 occurred at a dud gas well in Dexter, Kansas,
which contained a gas mixture comprising more than 70% nitrogen and
1.84% helium. As helium prices rise, nitrogen-rich sources are becoming
economical.
But
such small-scale schemes will be inadequate to meet escalating demand
for helium in Asia. For that, firms should look to liquefied natural gas
(LNG) – the precursor to shale gas – which enables the production of
helium from natural gas containing just 0.04% helium.
The
first helium-producing LNG plant was commissioned in 1994 in Algeria.
Qatar has one operating helium refinery, and another recently started
up. Together, they should produce 25% of the world’s helium during 2014.
Over
the next ten years, the helium industry will undergo a fundamental
transformation. With such Middle Eastern supplies – as well as major new
supplies from Russia – dominating the global market, the US may begin
to import helium. Given that much of the helium supply will be channeled
toward Asia, the European Union – which consumes more than 20% of the
world’s commercially available helium – must act now to develop a helium
policy that secures its future supply of this strategic commodity.
Although
high-tech industries in Europe depend on a steady supply of helium, the
gas has received scant attention there. In 2011, the United Kingdom, a
center of MRI manufacturing, excluded helium from a parliamentary hearing on strategically important elements, because it was “outside of the scope of [the] inquiry.”
Meanwhile,
more than half of Algeria’s helium molecules head north, unrecovered,
in gas pipelines via Spain and Italy. Given the importance of Algeria to
Europe as an alternative to Russian gas supplies, the EU should be
focusing on developing its helium policy accordingly.