FEATURE-Full of hot air: Helium producers eye Canada as U.S. reserve shrinks

By Rod Nickel
MANKOTA, Saskatchewan, July 4 (Reuters) - An approaching
squeeze in U.S. helium supplies has producers of the gas, used
in everything from party balloons to magnetic resonance imaging
(MRI) machines, looking north to Canada's wheat fields.
Almost three quarters of U.S. helium demand is filled by an
underground reserve in Amarillo, Texas. But the U.S. government,
which controls it, has announced plans to get out of the
commercial helium business by 2021.
That has prompted refiners and customers to look further
afield, taking them to the Canadian provinces of Saskatchewan
and Alberta.
In April, Virginia-based Weil Group Resources opened
Canada's only high-grade helium plant near the village of
Mankota, Saskatchewan, population 211. The $10 million project
provided welcome economic activity in a province hit hard by the
oil price crash.
The plant, which can produce 40 million cubic feet per year
for Germany industrial gas company Linde AG LING.DE and other
buyers, will be followed soon by a plant in Alberta, according
to Weil.
"I believe southwest Saskatchewan (and) southeast Alberta to
be prolific future helium producers," said Bo Sears, president
of Weil Helium.
Helium, a $4.7 billion industry according to Mordor
Intelligence, is a byproduct of natural gas production. But
because of high prices, small players are exploring fields of
helium-bearing gas once considered too expensive to exploit,
said helium consultant Phil Kornbluth.
Canada has the fifth-largest global helium resource as
measured by the U.S. Geological Survey.
"The gas in Saskatchewan and Alberta has rich concentration,
which you don't find everywhere," Kornbluth said. "And Canada is
politically secure. If you have a choice of Canada or Russia,
where would you rather do business?"
Saskatchewan issued 17 permits and leases from 2014 to
January 2016 for helium, its busiest period in 50 years,
according to government records reviewed by Reuters.
"There's some optimism that this could grow to be a pretty
good opportunity," said Saskatchewan Economy Minister Bill Boyd.
Quantum Helium Management, which opened a lower-grade helium
plant in Saskatchewan in 2013, is planning to build two more
plants within two years in Saskatchewan and Alberta, said
president Ovi Marin.
The wind-down of the U.S. reserve is a "positive element,"
Marin said. "We have a niche and we plan to expand on it."
Production outages contributed to a three-year shortage of
helium until late 2013. Supplies are currently ample, partly
because of new output from Qatar. Exploration firm Helium One
also plans to tap new resources in Tanzania.
But prices of helium from the reserve managed by the U.S.
Bureau of Land Management (BLM) are 84 percent higher than a
decade ago, and the wind-down is forcing refiners Praxair Inc (NYSE:PX)
PX.N , Air Products and Chemicals Inc (NYSE:APD) APD.N to look elsewhere
for future supply, Kornbluth said.
"We realize that the BLM system is in decline and eventually
will be depleted," said Air Products spokesman Art George. "At
the same time, the world's demand for helium is likely to
continue to grow and will require additional new sources."
The trend has Western Digital Corp WDC.O , which uses
helium in its hard drives, adding suppliers in more countries
including Canada and maintaining a six-month supply buffer, said
vice-president of product marketing Brendan Collins.
Tightening supplies may encourage helium users to substitute
other gases or recycle helium, as they did during the last major
shortage.
General Electric (NYSE:GE) Healthcare GE.N , which uses helium to
cool magnets in MRI machines, is finding ways to capture helium
during manufacturing for reuse and redesigning magnets so they
are less dependent on the gas, said spokeswoman Amanda Gintoft.
It is also counting on new sources coming online.
"Our helium supply is a strategic priority," she said.