Helium Supply: Shortage or Myth? An Objective Update Clears Picture
An SGR Interview with Phil Kornbluth, Executive Vice President, Matheson Tri- Gas Global Helium.
Specialty Gas Report: So much has been written about the helium shortage recently. Has the media been getting the story right?
Phil Kornbluth: Only partially, I’m afraid. Certainly, the helium shortage has received lots of publicity. Everyone who has anything to do with helium is aware that there is a shortage. However, much of what has been reported is of dubious quality, with a fair amount of misinformation tossed in.
It seems that members of the media will speak to anyone who answers the phone and is willing to answer their questions, regardless of whether that person is really qualified to do so. There are probably only five or ten folks in the industry who have a broad understanding of the subject, and every one of them, including me, has some gaps in their knowledge. Also, many of the reporters do not bother to check their facts or even have enough technical background to put the helium supply story in the proper context.
I have accumulated a file of some ridiculous statements in print, such as: “The world’s supply of helium will be totally depleted by 2015,” when in fact, the person who provided the information to the reporter was referring to the sale of the U.S. government’s helium stockpile, which contributes less than one-third of the world’s supply. Of course, there is no mention in those articles of the significant new sources of helium that are expected to begin production before 2015.
Another thing that contributes to the misinformation is that some of what is out there in the media is the result of press releases by organizations that are trying to push a particular agenda. I’m referring to groups representing party balloon suppliers, or some of the scientific associations that are concerned about their inability to obtain supply. Or even the increased cost of helium itself. Some of these groups would like to restrict U.S. helium exports so that the domestic supply is increased, resulting in a reduction in price. I doubt, however, that these efforts will be successful.
Part of the reason that I agreed to do this interview is that it provides an opportunity to correct some of the misinformation that is out there.
SGR: What is the helium supply situation now, and how does it look for 2008? Has the situation improved compared to that of a year ago?
PK: The market is still tight, but recently, things seem to have improved. Exxon- Mobil, which only ran at 85 percent of capacity for much of last year, repaired its problem in October. Now, that company is back to full capacity. Exxon-Mobil’s improved production has added roughly 200 MMscf, or about three percent of annualized supply back into the market.
Another incremental increase in the world’s supply has come from increased production by the plant in Qatar. That plant, which has annual capacity of at least 600 MMscf, has ramped up from 60 percent of capacity through much of 2007 to a current run rate that we believe to be in the 80 percent to 90 percent range.
That production in Qatar is worth 120 to 180 MMscf/yr of additional supply— and there could be further improvements later this year.
Partially offsetting these positive factors, we have continued depletion of the crude helium sources that provide feedgas for the six helium refineries connected to the Bureau of Land Management’s Crude Helium Pipeline and Storage System.
We don’t think that all of those plants can run at capacity at the same time anymore, because the current production of crude helium from the Hugoton Field in Kansas, when added to what the BLM makes available from the government stockpile, no longer adds up to the combined capacity of these plants. We’re expecting the gap to get bigger each year based on eight percent per year depletion of the Hugoton Field.
Another big factor, of course, is that all of the world’s helium plants are running reasonably well right now and we are not aware of any recent problems with the Crude Helium Enrichment Unit that is operated by the BLM. This is not too surprising, since most planned maintenance on the natural gas processing and LNG plants that produce crude helium is usually scheduled during the Summer and early Fall. Unfortunately, that is also the time of year when helium demand is at its highest due to the seasonality of demand in the diving and construction markets.
Right now, there is more supply in the market at this point in the year than there was in 2007. However, despite the fact that most suppliers have eased up on, or totally removed supply restrictions, the market remains tight and vulnerable to shortages if or when plants go down for maintenance later this year.
This year’s first test of the supply chain is likely to occur during a period of planned maintenance on the Crude Helium Enrichment Unit that is scheduled for March. 2008 could still be a replay of 2007—but we’re off to a better start.
SGR: How does the helium supply picture appear to you in the years following 2008? When do you think the helium shortage will come to an end?
PK: There’s not a lot of new supply expected to hit the market before late 2010 or 2011. Matheson Tri-Gas, in partnership with Air Products, will be bringing on a new source in Wyoming in mid-2009. This source will initially add 200 MMscf/yr of capacity to the market, with the potential that capacity will double two years later. Also, in 2009, Linde will bring on a 150-MMscf/yr plant in Darwin, Australia.
That’s all we see before late 2010, when larger new sources might begin production. With continued depletion of the Hugoton Field impacting U.S. production, total capacity will be pretty flat during 2009 and most of 2010.
Since I don’t think that demand is going away, we expect the market to remain tight right through 2010.
In late 2010 or 2011, we could see significant new helium production from new plants in Algeria, Qatar, and Russia, as well as a doubling of capacity at the Skikda, Algeria plant.
While the timing of these projects is somewhat uncertain, 2011 is currently our best guess as to when capacity utilization will return to more normal levels. Who knows, we might even see a period of oversupply at some point!
SGR: OK, I think we’ve covered the helium supply outlook pretty well. Would you like to say anything about how Matheson Tri-Gas and Taiyo Nippon Sanso are doing since they acquired some of Linde/BOC’s helium assets?
PK: We’re doing OK. We’d be having more fun if we were able to grow our business, but we will be largely sold out until production from the Riley Ridge source commences in 2009. In the meantime, our focus will be on profit improvement initiatives and developing an independent (from Linde) supply chain. This year, we will be building new helium transfills at Irwindale, California, and at a Northern California location somewhere in the Oakland area. We will also continue to be alert for opportunities to develop new sources of supply.
SGR: Thanks, Phil. We appreciate you sharing your views with us.
