MOSCOW - Blimps long ago lost their value
as a means of cargo transportation, military
reconnaissance, or anti-aircraft defense; whilst
the helium that fills them - more safely than the
combustible hydrogen gas which brought down the
Hindenburg in 1937 - is sharply increasing its
value in other applications. But the United
States, which is currently producing most of the
world's helium, is short of fresh supplies and low
on stocks.
This is because the
government-set price is rising too slowly to cover
the combination of rising demand, delivery and
distribution costs, and spot-price speculation. To
fix this in the short term, the US Congress is
considering a new bill, the Helium Stewardship Act
of 2012, but no vote is likely on that until next
year. Much of
the recent reporting of
a helium shortage, and threat to helium-supplied
operation of medical scanning machines, has been
stimulated by lobbying for the enactment of this
bill by the commercial interests; naturally, they
want to see the US government lid on helium prices
lifted.
The Americans believe not only
that they dominate worldwide production, but also
that they hold the largest reserves of helium in
the global market. In theory, that's a combination
that should keep most of the profit from a
commercial helium bubble in American pockets.
However, Gazprom and Russian experts believe the
US reserve estimates to be quite wrong. Russia,
they claim, holds the largest share of helium
reserves.
The key to meeting rising
demand, they also claim, lies in the opening of
two of Gazprom's biggest new gasfields, Chayanda
(Sakha region) and Kovykta (Irkutsk), accompanied
by investment to build Russian plants to liquefy
helium - a form of the gas which currently isn't
produced in Russia, and must be imported.
Building these two gasfields is exactly
what chief executive Alexei Miller told President
Vladimir Putin on October 29 that Gazprom intends
to do as quickly as possible. Either that will
take the gas out of the helium bubble, or else it
will blow the windfall profits in an unexpected,
Russian direction.
Last year, according to
the US Geological Service (USGS), the US produced
140 million cubic meters (mcm) of helium gas; of
that, 83 mcm came from active natural gas wells,
and 57 mcm from the federal government's National
Helium Reserve. That's an underground stockpile
known as the Bush Dome Reservoir at Amarillo,
Texas. Altogether, this US output amounted to 78%
of worldwide production. The USGS calculation is
that US reserves of helium are 4 billion cubic
meters, trailed by Algeria with 1.8 bcm, and
Russia with 1.7 bcm.
Worldwide
distribution of helium reserves (million cubic
meters)
Source:
UGSG report.
According to Lola Ogrel,
deputy general director of the Infomine Research
Group in Moscow, last year Russia produced a
little less than 4 mcm of helium gas. But data
collected in 2003 by Russian experts indicate that
Russian helium reserves total almost 17 bcm -
322.6 mcm in Russian reserve classifications A and
B; 9.1 bcm in classifications A, B and C1; and an
additional 7.9 bcm in classification C2. "The
Americans are wrong on the order of magnitude,"
Ogrel says. " In my latest report, I have
determined that Russia holds 34% of world
reserves; and the US 18%. Qatar holds 21% and
Algeria 17%."
Other Russian experts say
they are puzzled by the American figures. Even
allowing for counting classification differences,
and the distinction between reserves and
resources, the Creon Energy firm in Moscow says
"the [USGS] figures are rather strange. According
to our data, the leaders of helium reserves are
[in order of magnitude] Russia, Qatar, the United
States and Algeria. The figures for reserves are
as follows: 11.2, 10, 8.5 and 8.4 billion cubic
meters, respectively. It should be understood that
the reserves data are based on the percentage of
helium in natural gas in the fields."
Recent claims by Iran for its South Pars
gasfield suggest helium reserves of 10 bcm. A
Russian-led feasibility study is under way in Iran
to prove the field's capacity.
At a
conference of Russian helium industry experts in
Moscow on October 23, it was reported that growth
in demand for helium in Russia is growing faster
than 15% per year. For the time being, advertising
blimps and balloons are the biggest source of
domestic demand for the gas. But liquefied helium
for cooling applications - in Magnetic Resonance
Imaging (MRI) scanners, for example - is required
in even faster growing volumes, all imported. A
study of the Russian helium market by Ogrel is
available from Infomine.
At the moment,
there are two Russian plants processing helium for
sale - Krior and NII KM. Feedstock gas for Krior
comes from Gazprom's subsidiary, Gazprom Mining
Orenburg. When the latter lifted its helium price
in 2011, Krior was forced to cut output. Imports
of liquefied helium are managed by Russian
subsidiaries of the two global leaders in the
industrial gas market, Air Liquide (France) and
Praxair (US). Gazprom estimates that domestic
Russian consumption of helium is currently running
at about 2 mcm per year, while the Orenburg
production complex has capacity to turn out 5 mcm
per year.
The circumstances in which
Gazprom has exercised its helium monopoly to
reduce the commercial independence of the domestic
processors of liquid helium, preventing them from
exporting on their own account, make a complicated
tale which has moved in and out of the Russian
courts.
If the new Congressional
legislation doesn't stimulate a rapid expansion of
new helium in the US, the Gazprom plan for the two
fareastern gasfields at Chayanda and Kovykta will
be capable of exporting 60 mcm of helium by the
year 2020. That's a fraction more than the US
government's Bush Dome reserve is currently
supplying the market. Washington's strategic
rationale for conserving Bush Dome may therefore
shift - to saving helium consumers from Gazprom.
On October 29, the Kremlin released this
transcript of Putin's meeting with Miller. The
bottom-line was that Gazprom must hurry to build a
new plant for liquefied natural gas (LNG) at
Vladivostok for tanker shipment to the Asian and
Pacific market. Capacity will be 10 million tonnes
per annum, to be supplied from Chayanda and
Kovykta; they are to be connected to the LNG
refinery by a 3,200-km pipeline. The output of the
two new gasfields is estimated at about 50 billion
cubic meters per annum, 20bcm to be piped
eastwards to the Vladivostok refinery, and 30bcm
to be delivered by a separate pipeline as natural
gas to China. Agreement with the Chinese on that
pipeline and volume of delivery is in negotiation.
Miller promised Putin the Vladivostok
plant will be completed, along with the supply
pipeline, by 2018. The plant will cost an
estimated $7 billion, the pipeline $24 billion,
and the Chayanda field start-up, about $14
billion.
There is no mention of helium in
the Kremlin transcript. Gazprom confirms that
Chayanda has a high concentration of helium. "The
development of the Chayanda and Kovykta fields,"
says Ogrel, "will make economic sense if a
production level is achieved of 25 bcm of natural
gas per year. The demand for gas in Eastern
Siberia is estimated at 5 bcm per year. Therefore
what must be resolved is the issue of natural gas
exports to China and other Asia-Pacific
countries."
Asked to clarify its helium
production plan, Gazprom says it "has begun to
establish in Yakutia [Sakha] a gas production
centre based on the large Chayanda field, the gas
from which, in particular, contains a high
concentration of helium. In 2017, the company will
begin production of gas (including helium) at the
field. The next step will be the creation of the
Irkutsk gas production centre, and in particular,
the development of Kovykta field, which also
contains helium. In the future, large-scale
production of gas (including helium) will be
established in the Krasnoyarsk Krai". Gazprom said
it has prepared no estimate of the cost for
developing the new production chain for helium gas
and liquid helium.
Creon Energy estimates
indicate that compared to US helium concentrations
of up to 1.9%, Chayanda is at the 0.5% level,
while Kovykta is at 0.28%, still well above the
current threshold for commercial profitability. A
study of the future for the Russian helium
industry, issued earlier this year by Ernst &
Young, concludes that US supplies are likely to
dwindle, while helium production and liquefaction
projects planned by Algeria and Qatar may generate
an over-supply in the global market.
"There is clearly a market niche which
Russia can occupy in the foreseeable future," the
Ernst & Young report concludes, "if an
investment decision is made today. In addition,
project development should be supported with
incentive programs for helium consumption in
Russia to avoid the risk of overproduction. Third,
construction of a storage reservoir for helium
extracted at all gas fields in Eastern Siberia
will require an investment of $1 billion - $2
billion to purchase helium in 2030, and these
funds would probably be frozen for a long period."
At the Moscow helium industry conference
in October, a Gazprom export executive, Nikita
Pozdnyakov, said the importance of helium is not
in question. But he added that the strategic
storage of helium should be created, "not as an
end in itself, but in order to be able to quickly
monetize the volume of helium pumped into storage
in line with the growth in global demand for the
product."
John Helmer has been a
Moscow-based correspondent since 1989,
specializing in the coverage of Russian
business.
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