Rarefied Air: Drilling for Helium in North America

Abstract

Helium is one of the most abundant in advanced medical technologies such as MRIs, and in cryogenics, aerospace applications, and microchip manufacturing. It is also used to fill party balloons. It’s essential, expensive, and supplies are running low. Helium is about 100 million times more abundant in one place—but that place is on the moon. While trace amounts can even be found in the very air we breathe, the gas is difficult to find in commercial quantities, and those quantities are usually found as a byproduct of natural gas discoveries. Historically, about 40% of the US supply of helium came from the Federal Helium Reserve, a US Bureau of Land Management (BLM)-operated storage reservoir, enrichment plant, and pipeline system near Amarillo, Texas. The reserve was set up in 1960 as a strategic repository so that BLM could supply crude helium to private helium refining companies, which in turn refined it and marketed it to consumers. In the mid-1990s, Congress passed a bill to sell off a large part of the reserve’s supply to help pay off the facility’s debt, and effectively set in motion the federal government’s exit from the helium business. In 2013, BLM said it would begin auctioning off an increased percentage of the reserve annually as part of the bill. Last year, BLM announced the closure of the reserve. At the time of the announcement, BLM Deputy Director for Policy and Programs William Perry Pendley said “now it is time for the US government to remove itself from the helium business and allow the private sector to further develop this industry to meet the supply needs of the United States, creating a sustainable economic model and jobs for Americans.” BLM held its final crude helium auction in 2019, with the price rising 135%, from $119/Mcf a year earlier to $280/Mcf. Market pricing for helium is difficult to know. It is not a traded commodity, and pricing is normally based on long-term, confidential contracts. It’s a niche market that suffers from a lack of detailed analysis due in large part to the availability of its closely held data. The helium industry shares many aspects of the oil and gas business. Commercial deposits are found via geological survey; then, once identified, drilling begins. Outside of the search and discovery, helium can also be a useful tool for those in the oil business. It can be used for leak detection and in specialized welding due to its inert properties and high heat transfer. Additionally, as the oil field moves more toward digitalization, storage of big data will need helium for the construction of storage drives and to keep server farms cool. Swapping Hydrocarbons for Helium As scientific developments advance, the need for helium increases—a notion not lost on Canada-based Avanti Energy. The company’s CEO Chris Bakker has more than 2 decades of experience in oil and gas, most recently working as a commercial negotiator with Encana/Ovintiv for major facilities and pipelines in the Montney gas play. Today, he and his team are looking for commercial helium deposits in southern Alberta and northern Montana.