Lessons To Learn From Qatari Helium Situation, Says Kornbluth

The helium business was caught without a Plan B and has a number of lessons to learn from the Qatar embargo that impacted upon helium supply markets in summer 2017, says esteemed consultant Phil Kornbluth.

While acknowledging that such a diplomatic situation was completely unexpected, Kornbluth – President of Kornbluth Helium Consulting and a veteran of the helium sector with more than 30 years of experience working for some of the biggest players in the business – described ‘almost a complete lack of contingency planning by the industry’. Kornbluth was speaking at gasworld’s MENA Industrial Gas Conference 2017 in Dubai (UAE), where he was giving an update on the current market situation. On 5th June (2017) a Saudi-led group of countries comprised of the UAE, Egypt and Bahrain announced an embargo of Qatar, a fraught political stance that continues today and appears to show no sign of abating. Within just days it became clear that with Qatar (Ras Laffan) being a major source of helium production, the diplomatic embargo immediately began to impact upon global helium markets. This, Kornbluth explained, left the helium business in something of a tailspin. He pointed out that:

  • Everybody was impacted
  • Suppliers most impacted by loss of Qatari helium implemented supply allocations, and
  • The spot helium market dried up.

It also left the helium industry with major lessons to be learned. “I can’t say that I would have done anything different, because the embargo was so unexpected. It was very unexpected. But there was almost a complete lack of contingency planning by the industry, and nobody had a Plan B when this happened,” he reflected. “The ‘new normal’ is Plan B now, but I think there’s a lesson in there about contingency and risk management. This was a good lesson that you need to think about not just the obvious risk to your business but also the less obvious ones.” This is increasingly significant, Kornbluth continued, as the global helium business is arguably more fragile than ever before. “For many of my own years in this business, it was pretty easy in that the BLM system and stockpile in the US provided a great deal of flexibility and the industry had a lot more ability to respond to outages. But the global supply chain now is more fragile and inflexible. Most of the sources in the world today are take or pay sources, and it’s just harder to flex production,” he explained. “There is greater exposure in the markets to the political situation than there used to be.” It’s important to have a diverse supply portfolio. If you have over exposure to a single source, bad things can happen occasionally. It really is beneficial to have a portfolio of sources so that if one source goes down, you have capacity available from somewhere else.” Kornbluth was a relatively late addition to the MENA conference’s agenda, added to the roll-call of speakers when it became clear that the Qatar embargo was having an impact upon global helium markets and delegates would benefit from an update on the current situation in the region and its ramifications.

MENA conference day one closes

To this end, he offered the view that helium markets should be ‘relatively normal’ again by the end of September and noted that despite the impact of the Qatar embargo on helium markets, there had been minimal impact on contract prices due to the event being a temporary challenge (only a three-week shutdown). “In terms of where we are now, the helium market should be relatively normal by the end of this month. The market should be returning to what I call a ‘new normal’.” Though minimal, price increases have been inevitable, however. “In terms of the implications, the bottom line is it takes longer and it costs more. I would expect those costs to be passed through, to the customers of the customers of Qatari helium. There’s also a longer supply chain, which also means it costs more because it takes longer to ship helium to market.” In closing Kornbluth, an Editorial Advisory Board member for gasworld (US Edition), also gave a broader update on helium markets. He explained that the market is modestly over-supplied when all of the major sources are operating normally, and demand growth remains modest too. As a result, the market is gradually returning to balance in supply-demand.

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Nuclear Fusion Is Closer To Reality Than Ever

This is yet another story that has been flying under the proverbial radar for a couple of years now, but it could mean that the days of Big Oil’s dominance over our economic system and our world are coming to an end, a lot sooner than the executives at Exxon-Mobil and BP would like to think. The good news is that over the past two years, scientists in Germany, China, South Korea, the U.K. and the U.S. have come very close to finding the Holy Grail of sustainable energy – sustainable nuclear fusion. According to M.I.T. Research scientist Earl Marmar, the world’s energy grid could be powered by a clean, sustainable ball of superheated plasma within the next twelve years. For many years, cold fusion has really been regarded by the scientific community as being akin to the legendary King Arthur’s Holy Grail – an unachievable ideal. That is understandable. Creating a fusion reaction basically amounts to creating a miniature star, like our sun, and keeping it going while at the same time keeping it confined and under control. In fact, one could consider a star to be Nature’s own fusion reactor. Unlike nuclear fission, which involves splitting the atom, fusion is the joining, or “fusing” of two lighter atomic nuclei (hydrogen and deuterium), forming a single, heavier nucleus. This reaction releases tremendous amounts of energy in the process, and is what has powered our sun for approximately five billion years. The advantages of nuclear fusion over fission are many. It is far safer, produces much less in the way of radioactive waste, and can use seawater as fuel. The big problem so far is containing plasma heated to around 200 million degrees and sustaining the process for any length of time, and doing so in a cost-effective manner. Currently, fusion reactions are carried out in a device known as a tokamak – a donut-shaped apparatus weighing 23,000 tons and capable of heating plasma to 150 million degrees Celsius (over 300 million degrees Fahrenheit), which is ten times hotter than our sun. Needless to say, such equipment doesn’t come cheap. The solution, according to Marmar, is to make a smaller reactor. Major steps forward in this direction were taken recently here and in the U.K. In the U.S., researchers increased the efficiency of the process by adding a third element – in this case, helium-3 ions. The research was published last summer in Nature Physics. Meanwhile, in the U.K., a private company known as Tokamak Energy built a machine with a smaller donut hole, which in 2015 sustained a plasma reaction for a record-breaking 29 hours. Their latest model, the ST40, became operational in August, and is expected to produce plasma at a temperature of 15 million degrees by this fall. There is still a long road ahead and many problems to be solved before sustainable nuclear fusion becomes economically feasible – but recent breakthroughs are promising to break Big Oil’s stranglehold over the planet within our lifetimes. And there doesn’t seem to be much that the fossil fuel industry can do to stop it.

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Japan Weighs Exports Of Safer, Next-gen Nuclear Reactors

Order from Poland, worth as much as $9bn, may be there for the taking

Japan’s government is mulling plans to export next-generation nuclear reactors that promise a greater degree of safety, with Poland lined up as the probable first destination. The move, which would involve high temperature gas reactors, or HTGRs, is part of the government’s infrastructure export strategy. Poland, which is turning to nuclear power as a cleaner energy option, is looking at acquiring about 20 such reactors — equipment worth more than 1 trillion yen ($9 billion). Tokyo will inform Poland of its intentions by the end of this month at the earliest — though it may face competition from China for the order. The reactors in question use helium gas as a coolant, unlike conventional reactors that use water. This removes the risk of chemical reactions and vaporization — and thus the risk of hydrogen or steam explosions. A government source said the fuel and other features are designed to prevent a meltdown even when the cooling systems fail — as they did at the Fukushima Daiichi nuclear plant in northeastern Japan back in 2011. Poland relies heavily on coal-fired power plants. But in the wake of the Paris Agreement on climate change, the country wants to switch to HTGRs, which emit virtually no carbon dioxide. The Japanese government envisions taking orders through a public-private partnership and is soliciting the involvement of Hitachi, Mitsubishi Heavy Industries, Fuji Electric and other companies armed with related technologies. The Japan Atomic Energy Agency is proceeding with HTGR research and development for experimental use — not yet for commercial purposes. Using an experimental reactor as a foundation, Japan would ask Poland to cooperate on the development and export of a commercial unit. The Eastern European country, a source said, has a high level of interest in Japanese technologies. But China, too, is developing this type of reactor. The source said Poland has hinted at the possibility of awarding China the contract.

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Helium’s Potential Brings Excitement

Well, it’s not a gusher, but officials with the City of Medicine Hat’s petroleum division certainly think it could be, and soon. A plan to drill, extract and possibly refine helium in the region was spelled out at Thursday’s city utility committee meeting, citing drilling this month and a promise of a 12- to 24-month plan to monetize any find. “We feel comfortable that we have the people and the skills,” said NPGR general manager Brad Maynes. “We’ll still be the Gas City—it’s just not going to burn.” He titled his presentation — which will be given to council’s Sept. 18 meeting — as Helium 101. It was billed as a tutorial into a commodity most think of as perhaps whimsical, but is 100 times more valuable than natural gas and is used in a variety of industrial processes. The issue was sprung upon the population this week in a News article that reported quantities of the elusive element were present in ongoing oil drilling. None has actually been found yet, but helium-specific drilling will begin this month on leases quietly secured over the past year in southwest Saskatchewan. The gas comes from deep underground and becomes trapped in pockets that can form beneath conventional oil pools. The city’s existing exploration program will now pick promising targets, seek out oil, then go about 500 metres deeper in search of helium, said Maynes. The conventional wells, estimated to cost up to $1.5 million each, will be paid for out of an existing three-year $45-million budget to boost oil production. Any new spending request would go before council. Committee chair Coun. Bill Cocks said the exploration and initial handling is similar to natural gas, though it’s much harder to gather and logistics are more complicated in later stages. He said it could become a lucrative offshoot of the city’s energy portfolio if market conditions persist. “I think it will catch people by surprise that it is as valuable a commodity as it is,” said Cocks, who admitted he was surprised when the plan was outlined to council in 2016. “We’re in a position to anticipate some marketable quantities. If it’s there, we’ll find money, or find someone to partner with … That’s the nature of the oil and gas business.” That city is in the midst of a program, known as the organic growth strategy, that seeks to reduce the city’s dependence on low-priced natural gas. It was a key reason why Maynes was hired in 2015 with a strategy to divest low-production wells, remove future liability, and find more light oil to boost revenue. The third leg of the strategy, only revealed this week, is helium, demand for which in high-tech manufacturing is set to outstrip production in North America. It began last year when the city bought a huge amount of seismic data, and the division has studied the data since. Maynes, who specialized in the region as a private sector geologist, says “untapped potential” is in the area known mostly for shallow natural gas — usually referring to light oil, such as the Glauc C in Medicine Hat. That now also includes helium, which has been produced in small quantities near Swift Current since the 1960s. “That potential that’s in southwest Saskatchewan should extend to southeast Alberta as well,” he said. The royalty regime for extracting helium is much lower in Saskatchewan, although an Alberta lease has been secured, according to documents, and the city is lobbying the province on rate changes. With the nearest major helium refinery in Kansas, and a spike in interest from exploration companies looking for helium in the Western Canadian Basin, officials feel that eventually a refinery here could service the entire Prairies. Also, the city’s position as a mid-sized petroleum company, if a substantial supply is found, could give advantage over smaller companies in the sector. “(A refinery) is long term,” said Maynes. “But it’s something we’ve thought about as our end game.” Only a handful of major chemical companies market the entire global supply from about 20 helium refineries around the world. Half the world’s supply is stripped out of Qatar’s massive natural gas production. Another 30 per cent comes from the United States, which has dwindling production and little new investment.

Helium’s potential brings excitement

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Time Will Tell With Helium Play

A global chemistry sector analyst says time will tell whether helium exploration will lift the City of Medicine Hat’s financial outlook, or whether the industry will take root in Western Canada. This week the city’s energy division announced advanced plans to drill for sources the valuable gas used in advanced manufacturing, and has been produced in small amounts for decades in southwest Saskatchewan.
If successful, it hopes to expand its exploration to Alberta and study the feasibility of building a refinery here. Analyst Bala Suresh covers industrial gases, supply chains and markets for IHS Chemical Weekly. He said small, niche production could be profitable and “could probably add to a growing market, but based on the information available right now, it’s not likely to impact on the North American market.” “It depends on if you can get a good price — if buyers turn up with a good margin, then it makes sense,” Suresh told the News Thursday. “How much they measure, the duration of the project, the capital cost involved — that will determine the feasibility.” City administrators agree. A presentation to a council committee outlined a plan to drill a series of exploratory helium wells in tandem with an ongoing oil program, then evaluate the results. While similar to petroleum exploration at the drilling stage, collecting and processing helium is much more capital intensive. Interest in the commodity has risen for about a decade, since the United States government announced it would sell off a strategic reserve. More recently, an economic blockade of Qatar has jolted the industry. Together those nations produce about 80 per cent of the world supply, which is used in medical equipment, fibre-optics, super-computing and other industrial applications. World prices have levelled out however, Suresh states. “We expect it to stabilize,” he said. “There has been new production coming on (around the world) … Fields in the U.S. are depleting and becoming less economic. “There are a few small plants that are coming on, but not enough to match what’s coming off.” “In North America, demand is growing by 1.3 per cent and supply is down 1.6 per cent, so imports are going to be covering the balance.” Top-grade helium fetched $200 per 1,000 cubic feet last year. Four chemical consortiums controlled virtually the entire world supply, processing it in 20 refineries around the world. The nearest to Medicine Hat is located in Kansas. Since the gas is difficult to contain and transport, it must be compressed and trucked at a temperature of -270C. That makes the logistics “capital intensive.” Yet, interest has risen since prices first rose. Since trace amounts of helium is typical in most natural gas production, stripping it out has been suggested to help beleaguered natural gas producers. At least two other companies are actively promoting their projects that target helium in Western Canada. Saskatchewan is fielding increased applications for special helium drilling permits. The inert gas occurs naturally at extreme depths underground. Due to light mass and low density, helium migrates upward but most is lost when it enters the atmosphere, eventually travelling to outerspace. Sometimes though, it is trapped in geologic formations capped by a layer of non-porous rock. Officials with the city expect first-phase drilling to be complete by the second quarter of 2018.

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