Energia
Helium Poised to Benefit from Supercomputers and Space Travel
Most people will be familiar with using the gas to inflate balloons which float into the air, and indeed this typically whimsical use of helium has industrial relevance for use in weather balloons. But the unique properties of this element have opened up a range of further industrial applications. Helium has the lowest boiling point of any known substance at -268.9 degree centigrade, only five degrees above absolute zero. It is therefore ideal for cooling superconducting magnets and is crucial for instruments such as MRI machines. At this temperature the element also becomes a "superfluid", which means that it can flow without losing kinetic energy. The demand for cooling superconductors alone currently accounts for 20% of global helium consumption, and is anticipated to continue rising. Companies that are poised to benefit from the gas' price increase include leading helium producers and explorers such as Gran Tierra Energy Inc. (TSX:GTE) (NYSE:GTE), Yuma Energy Inc. (NYSE:YUMA), Ring Energy Inc. (NYSE:REI), Energy Fuels Inc. (TSX:EFR) (NYSE:UUUU), and industry specialist American Helium Inc. (TSX.V:AHE) (OTC:AHELF).
The last two decades have each seen periods when global helium suppliers could not meet an increase in demand. Qatar closed two production plants in 2017 following boycotts by neighboring Arab nations. This effectively removed around 25% of the global helium supply from the market. With demand for helium ever on the increase and global production and supplies diminishing, helium prices are experiencing an unprecedented boom.
The US once supplied as much as 90% of the world's helium from Federal Reserves built up since 1921. From 1996, however, these reserves have been sold at a significant under-value to cover the reserve's historic debt, and this cheap and ready supply has largely discouraged the exploration of new sources around the world.
Two of the largest helium assets in the US, Hugoton and BLM, are known to be currently unable to sufficiently replenish their declining sources. As a new explorer, is focusing solely upon this element and with exploration success can become a supplier of this strategic commodity.
With helium stores and production looking increasingly threatened in the face of rising demand, it has never been more crucial to establish and develop helium deposits. One of American Helium's most exciting projects is its Bruin Point, Carbon County asset in Utah , consisting of over 17,000 acres across the state's second largest natural gas producing region. Helium is already known to be present in deposits within the region, and the project will benefit from ready-placed local infrastructure. Furthermore, exploration of the area has already been funded and nearing completion, with production anticipated to begin in little more than a year.
American Helium also enjoys significant reserves of the gas. Reports best estimate 3.7BCF to a high estimate of 6.3BCF (in accordance with NI 51-101), enough to almost supply the world's needs for an entire year. From a producer's perspective, this asset offers considerable security by ensuring that any unforeseen deficits in helium supply to future contracts could be easily covered.
recently announced an exploration venture to undertake an exploration drill program in Arizona with Holbrook Basin Energy LLC. The Holbrook Basin has been a well-established helium production district with two of the world's richest historic producing helium gas fields, the Pinta Dome and the Navajo Springs located in the region. The concentrations of gas range from trace amounts up to 10%. The industry benchmark for commercial grade helium ranges from concentration levels of 0.3% to 1%. Potentially high concentration levels and the rich nature of the area has some saying " Arizona is the Saudi Arabia of helium".
Only American Helium has chosen to focus its entire operations on this single element, allowing for the business to be highly specialized.
Helium is necessary for use in space rockets, and whereas years ago only the US and Russia used the element for these purposes, today there are numerous countries which have developed their own space programs, including the India , China and the EU. Bank of America predicts that the space industry will be worth $3 trillion over the next thirty years, compared to $350 billion today.
Furthermore, the super-cooling properties of helium are being applied in the development of quantum computers, which are set to potentially replace conventional machines in the future, further driving helium demand. Current estimates predict the global demand for helium to rise by 9% per year over the next three years alone. As an element which is both non-renewable and notoriously difficult to recycle, increasing demand coupled with ultimately limited supplies can only raise the price of this valuable commodity.
Perhaps a way to consider helium investments is to treat it similarly to investment in the lithium market. Just as lithium has become a vital element in technologies relying upon rechargeable batteries, so helium is crucial to those technologies which depend upon its unique properties. In a similar fashion, average helium prices over the last 17 years have risen by 8% annually, compared with a 9% increase in lithium prices over the same period.
This comparison shows how helium, like lithium, is set to become a vitally important global commodity. This has been demonstrated by the US and the EU each placing the element on their respective lists of critical raw materials, whilst the consistent increase of helium prices give a clear indication of rising demand.
The US Federal Reserve of helium currently provides around 25-30% of global supply and is anticipated to expire in 2021.
(TSX:GTE) (NYSE:GTE) was established in Canada in 2005 but focuses upon oil and natural gas exploration and production in Columbia , with rights to produce from further properties located in Brazil and Peru . The company has increased its production by 50% over the last three years, and intends to do the same again by 2020, with a cash flow which has remained healthy despite deflated oil prices.
(NYSE: YUMA ) is based in Houston, Texas and specializes in the acquisition, development and exploration of oil and natural gas resources in the US Gulf Coast. The company has experienced operating losses in recent quarters, and is diversifying its operations with strategic alternatives, such as a joint venture with two partners over 33,000 acres of the Permian Basin in Texas .
(NYSE: REI) is another Texas -based company focused on the exploration, development and production of oil and natural gas fields in the West Texan Permian Basin. The company has imported impressive results for the first quarter of 2018, and has around 60 drilling projects scheduled over the remaining year.
(TSX:EFR) (NYSE:UUUU) is the number one producer of uranium in the US from both conventional and in-situ recovery sources, and owns the only fully permitted and operational conventional mill for the conventional production of uranium and vanadium. The company has recently received approval to expand production of both elements at its mining projects in Utah .
As with lithium in the battery and electronics industries, helium is experiencing a boom in prices as a result of ever increasing demand from established and new technologies. With the US's Federal Reserve of the element due to expire soon and global stocks increasingly threatened, it is a critical time to watch this little appreciated non-renewable material.
,is the only company in the US focused entirely on supplying helium.
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