Helium prices are being squeezed higher due to an emerging supply crisis following a blaze at a Russian gas plant and unexpected downtime at an operation in the United States.
In Russia, a new US$30bn Siberian gas plant is reported by the Reuters news agency to have been offline for most of 2022 after its facilities caught fire for the second time following an initial blaze in October.
In Texas, a US Bureau of Land Management operation, which provides just over 10% of the world’s helium, is also said be out of action – albeit temporarily.
With two major streams of supply presently unavailable the international price of helium, which is typically in tight supply, has surged by around 50% in recent weeks from US$300 up to around US$450 to US$500 per thousand cubic metres (mcf).
At the same time, according to anecdotal reports, tier-one distributors have seen deliveries reduced (otherwise referred to in the industry as reallocation) which effectively represents a rationing of the vital inert gas.
As a result, shortages and higher prices are expected to filter down to the industries that need helium, according to Cliff Cain, an industrial gas consultant who specialises in helium and hydrogen.
“Reallocations are now going out to tier one suppliers and that’s just going to see a snowball effect rolling down to the small independent distributors and obviously at the end of the day the end-users,” Cain told Proactive.
He added: “Customers are going to demand it. Helium is a critical path product. The price is going to go up, that’s just how the world works in helium.”
For the initiated, helium is a critical and irreplaceable element in medical technologies, including the operation of MRI scanners, as well as in the manufacture of semiconductors.
Significantly, useable helium is a relatively rare commodity and primary, natural sources of the gas are uncommon (because most of it disperses into the atmosphere easily).
As a result, most commercial helium is produced as a by-product of hydrocarbon gas operations, with gas supplies containing around 0.5% helium seen as viable sources of extra revenue.
At Cliffside in Amarillo, Texas, supply is predicted to be offline for about a month though, according to Cain. The Russian plant may be out of action for longer.
The Amur gas plant in Siberia is a large-scale US$30bn natural gas operation built in a remote part of Russia to feed a pipeline into China.
The facility previously caught fire in October and fresh video reports out of Russia earlier this month purport to show a second large scale fire during a new attempt to start up the plant.
At least three of the plant’s four gas chains are believed to be out of action, Cain says, and it is speculated that the plant could be offline for most if not all of this year.
Along with its natural gas supply, Cain says the Amur plant was expected to salve the international market for helium by serving Chinese buyers, which now won’t be seeing those supplies any time soon.
“What was anticipated was a new supply coming online in Russia which would have put some downward pressure on pricing, but it is just not going to be there and demand is back at pre-pandemic levels,” he explained.
“Before the pandemic we were in a situation of tight supply and reallocations anyway and this is exacerbating the recovery coming out of the pandemic.
“We’re seeing prices of US$400 to $500 per mcf (thousand cubic meters) going into Australia and India, and that’s probably going to be the price you’ll see in the markets around the world.
“The anticipation was that the price would drop to US$200 to US$250 as the Russian supply came online, depending where you are potentially even lower, possibly down to US$180.
“I think of lot these customers out there probably signed deals at those prices, but that won’t be happening now.”
Anish Kapadia, founder of London-based oil and gas consultancy AKap Energy, in a recent social media post, was sceptical over the prospect of the Amur plant coming back online soon.
“We've heard estimate that supply will resume in Q3 but this seems fanciful given the damage and on past experience,” he said.
“It is likely to cause supply shortages this year as demand for helium rebounds and this will cause knock on impacts in many industries as helium is a vital, irreplaceable strategic product.
Cain, meanwhile, emphasised the need for new sources of helium.
“This is the importance of the independent explorers out there looking for new supplies, that’s why their job is so critical,” he said.
“There are really no new options out there.”
Cain has had a consultancy relationship with multiple exploration companies searching for primary sources of helium, including London-listed Helium One which is advancing a project in Tanzania.
A strong helium price would provide a supportive backdrop for the small-cap explorer albeit its asset remains early stage and won’t be producing helium during this near-term peak in prices.
Helium One chief executive, David Minchin, noting the tight supplies, said that it highlighted the strategic opportunity for his company as it seeks to discover and define helium deposits that can be brought into production in the coming years.
Later this year Helium One plans to drill its next well to test the potential of its project in Tanzania.