Helium One plc (LON:HE1) Chief Executive Officer David Minchin caught up with DirectorsTalk for an exclusive interview to discuss the new crisis in the helium market.
Q1: While Helium One have been busy drilling their maiden exploration well at the Rukwa Project in Tanzania, there has been a global supply crisis in the helium market. Tell us what has happened?
A1: The global helium market is tightly balanced and prone to supply shocks as by-product producers can come off-line at a moments notice. This is exactly what has happened here as three recent events have removed supply from the market during the months of June and July.
First the Skikda project in Algeria shut down in mid-June due to problems with the liquid natural gas plant. Skikda sources helium as a by-product of liquid natural gas so a problem in the main plant has a knock-on effect on the helium plant, effectively removing 300,000-400,000Mcf/yr of supply from the global market.
The impact of the sudden closure of a production facility in Algeria has been compounded by two further unexpected closures in the United States. Firstly, the Keyes Helium Plant went down due to a broken turbine, which removed 100,000Mcf/yr of production. Secondly, and more importantly, the BLM Crude Helium Enrichment Unit, which toll treats gas from several suppliers in the mid-west, has been forced to close due to safety issues with the main crude pipeline. This closure has removed a further 800,000Mcf/yr of global supply.
This brings the total deficit due to June/July closures to over 1.2Bcf/yr.
Q2: Is the market able to cope?
A2: In short – no. The market was already fragile prior to these outages and with the loss of over 1.2Bcf/yr of production we expect to see severe market shortages and price increases until the situation is resolved. Helium cannot be substituted in a number of high-value processes including uses in MRI scanners and medically assisted breathing and manufacture of next-gen electronics, semi-conductor chips, flat panel displays, fibre optics and high-capacity hard-drives. With supply disruption expected to last until September at the earliest, we could expect to see supply chain disruption across a range of products into Q3 and Q4 2021.
Q3: Where does Helium One come into this?
A3: While the business is a long way from production, we are the only company focussed on primary helium exploration which has the capacity to provide a long-term solution to the global helium supply crisis. The company has reported an Un-risked Prospective Resource of 138 Bcf (2U/P50) for the Company’s Rukwa Project: Meaning we have the potential to discover the largest primary helium deposit in the world, with very high helium concentrations, and the capacity to become globally strategic in our ability to significantly resolve helium supply/demand issues for a number of years to come.
With drilling nearing completion at Tai-1 and testing ready to take place, we are positioned to take the next step in talking to end-users and off-takers to fast track the development of Rukwa Project and provide a meaningful supply of primary helium to the market for the next century.