Helium: Irreplaceable High-Tech Resource of Strategic Value as War and Underinvestment Squeeze Supply

• Helium is a critical gas used in high-tech applications like MRI machines, fiber optics, semiconductors, and aerospace. Demand for the gas is expected to double by 2035 as used widely in manufacturing due to its cooling and inert properties.
• The U.S. has been the largest helium producer but production has declined as the Federal Helium Reserve was depleted and shut down in 2021. This has spurred interest in production in other countries. In 2023, Qatar became the largest helium producer, produced about 66 million cubic meters of helium and reserves  at 10 billion cubic meters.
• Saskatchewan remains the only province currently producing helium commercially. Canada has an estimated 70 billion cubic feet of helium resources (5th largest in the world) and Alberta introduced a new royalty rate to attract producers.
• Algeria, a major helium supplier, had to shut down helium production due to soaring natural gas demand in Europe caused by Russia's invasion of Ukraine. This supply disruption is further increasing helium prices.
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Helium is an increasingly vital element for a range of industries, including medical technology, aerospace, electronics, and telecommunications. The unique properties of helium, such as its inertness and its ability to remain in a liquid state at extremely low temperatures, make it irreplaceable for applications like MRI scanners and superconducting magnets. Yet, the global helium market faces significant supply challenges, highlighted by the depletion of traditional reserves in the United States and increased geopolitical tensions. Consequently, investment in helium has gained traction, with many viewing it as a strategic commodity essential for technological advancement.

Understanding Helium’s Market Dynamics

Demand Driven by High-Tech and Medical Applications

Helium’s unique properties are indispensable to many high-tech and medical applications. For example, in MRI machines, helium’s ability to cool superconducting magnets is critical. Additionally, helium is essential for the manufacture of semiconductors, optical fibers, and aerospace components​. The global demand for helium is likely to nearly double and could exceed 322 million cubic meters by 2035 for the gas used widely in manufacturing due to its cooling and inert properties^[5]

This upward trend is not only spurred by healthcare expansion but also by the booming electronics sector, particularly in Asia, where countries like China, South Korea, and Taiwan are expanding their semiconductor production​.

Declining Reserves and Supply Constraints

Historically, the United States was the world’s largest helium supplier, with the U.S. Federal Helium Reserve fulfilling much of the global demand. However, after years of declining production, the U.S. decided to close the reserve in 2021, significantly reducing its share in the global helium market​. This shift left the global supply increasingly reliant on other nations, notably Qatar and Russia. These countries are expanding their production capacity, yet the transition has created bottlenecks and driven up prices.

Algeria, a significant helium supplier, has had to limit helium production due to the high demand for natural gas in Europe, a situation intensified by the Russia-Ukraine conflict^[6]. Since European nations sought to reduce dependency on Russian gas, Algeria has increased natural gas exports to Europe, especially via pipelines to Spain and Italy. As a result, Algeria prioritized gas exports over helium extraction, leading to reduced helium output. This shift affects the global helium market, contributing to ongoing shortages and rising prices, as helium, usually separated during natural gas liquefaction, cannot be efficiently captured when the gas is diverted directly into pipelines for immediate export to Europe.

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The Role of Major Players: Qatar, Russia, and North America

Qatar’s Strategic Position in Helium Production

Qatar has solidified its role as a major helium exporter, drawing from its North Dome field, one of the largest natural gas reserves globally. Qatar’s helium production facilities at Ras Laffan, among the largest worldwide, give it an advantage in meeting global demand. In 2021, Qatar accounted for around 35% of global helium production^​[2]. Its strong production base and investment in additional capacity make it a key player in the helium market, although recent geopolitical tensions have emphasized the need for more diverse helium sources.

Russia’s Expansion with the Amur Facility

Russia has also moved to increase its share in the helium market, particularly through its Amur Gas Processing Plant in Siberia. Once fully operational, the facility is projected to meet about 30% of global demand, primarily exporting to Asia and North America^​[2]. This development is critical as Western sanctions have constrained Russia’s helium export channels, underscoring the geopolitical risks associated with helium reliance on specific regions.

North America: Rising Interest in Canadian Helium

In response to these dynamics, North American companies have shown renewed interest in local helium exploration. Canada’s vast helium reserves, particularly in Saskatchewan, position it as a potential supplier for North America.

Government incentives in Saskatchewan and Alberta have indeed boosted helium exploration and production. Saskatchewan’s Helium Action Plan, launched in 2021, aims to position the province as a leading helium producer, with a goal to supply 10% of the global market by 2030^[7]. This plan focuses on expanding exploration, building production facilities, and establishing purification and export infrastructure.

In Alberta, the provincial government introduced a specific royalty rate for helium of 4.25% in 2020. This favorable rate, along with Alberta’s geological suitability for helium extraction, has encouraged investment in helium projects. Alberta’s strategic initiatives align with Canada’s broader focus on critical minerals, positioning the province as a key player in the helium sector alongside Saskatchewan.

Rising Prices and the Investment Appeal

As helium demand outpaces supply, prices have risen considerably. Grade-A helium, refined to 99.997% purity, traded between $300 and $600 per thousand cubic feet in 2021, reflecting a stark increase from earlier years​^[4]. While the U.S. helium reserve price hovers around $550 per thousand cubic feet, the spot market for immediate delivery sees prices of $1,000 to $1,500 per thousand cubic feet. This price rise is driven by the high cost of production and transport, with helium being transported as a liquefied gas to save on volume. Companies with established extraction and processing capabilities are well-positioned to capitalize on these high prices, which are likely to continue given current supply shortages and rising demand:

Helium One

Helium One's recent progress on the Galactica-Pegasus project in Colorado and farm-in agreement with Blue Star Helium provide exposure to an already producing helium field with near-term growth potential from additional development wells. This diversifies Helium One's portfolio beyond its exploration projects in Tanzania and offers a faster path to cash flow generation. With drilling set to commence in Q4 2024 and first production targeted for H1 2025, Helium One is positioned to benefit from the tight helium supply market and rising prices underscored in the article. While the company awaits a mining license decision on its Rukwa project in Tanzania, the Galactica-Pegasus farm-in represents a strategic move to accelerate value creation and mitigate single-asset risk.

Georgina Energy

Georgina Energy's operational progress and strategic initiatives demonstrate its commitment to building a differentiated helium and hydrogen portfolio in Australia. The company's near-term focus on re-entering the Hussar well and advancing the Mt. Winter project towards drilling highlights its low-risk approach to developing proved helium and hydrogen resources. Meanwhile, Georgina's ongoing target evaluation and farm-in discussions position it for potential high-impact growth on a wider scale. The planned scoping study for a large-scale separation plant adds another dimension to the company's value proposition, signaling its ambition to become a vertically integrated producer capturing margins across the helium and hydrogen value chain.

With a strong balance sheet following its recent capital raise, Georgina appears well-funded to execute on its growth strategy. As investors seek multi-pronged exposure to the helium and hydrogen markets, Georgina's diversified asset base and expansion plans may offer a compelling investment case.

Royal Helium

Royal Helium's operational updates showcase the company's transition from helium explorer to producer, a key theme for investors seeking lower-risk opportunities in the helium space. With its Steveville facility in Alberta ramping up to full capacity and generating consistent sales of purified helium, Royal is well on its way to capitalizing on the supply shortfall and premium pricing emphasized in the investor article.

The company's ability to scale production towards positive cash flow and strong netbacks underscores the economic viability of its helium assets. Moreover, Royal's low carbon footprint thanks to nitrogen-rich wells offers an ESG angle that could attract sustainability-minded investors. As one of the few publicly traded pure-play helium producers, Royal is strongly positioned to benefit from the sector's favorable fundamentals. Investors looking for exposure to the helium growth story through a de-risked, cash-generating business may find Royal an attractive opportunity.

Desert Mountain Energy

As a revenue-generating producer with a significant acreage position in prolific helium-rich basins, Desert Mountain is well positioned to capitalize on the growing supply deficit and premium pricing environment. The company's producing asset in the West Pecos Slope Abo Gas Field in New Mexico, with 188 wells and over 50 miles of gathering infrastructure, provides a strong foundation of cash flow to fund growth. The recent relocation and commissioning of Desert Mountain's helium processing facility demonstrates the company's ability to execute on its operational objectives and reinforces its status as a near-term supplier into a tightening market.

Furthermore, Desert Mountain's 100,000+ acre position and successful drilling campaign in the Holbrook Basin of Arizona provides substantial upside exposure to one of the most prospective helium fairways in North America. With multiple discovery wells drilled and offset locations identified, Desert Mountain is at the forefront of Arizona's emergence as a world-class helium jurisdiction.

The Investment Thesis for Helium

Investing in helium offers a unique opportunity for several reasons:

• Growing Demand: Helium is indispensable in healthcare, technology, and aerospace, and demand growth is expected to outpace supply for the foreseeable future.‍
• Scarcity and Price Stability: Helium prices have risen sharply due to supply outages from major producers like the U.S. and Algeria. The supply shock from Russia's war in Ukraine is likely to push prices even higher in the near term. The limited global supply and high extraction costs contribute to stable or rising prices, making helium a favorable long-term commodity investment.‍
• New Market Entrants and Infrastructure Investment: Canada has significant untapped helium resources and several provinces are making a concerted push to boost production. Fiscal incentives like Alberta's new royalty rate make Canadian helium an attractive opportunity. Emerging players in Canada, supported by government policies, are investing in helium infrastructure, which could diversify supply sources and reduce regional reliance on the Middle East and Russia.

Key Takeaway

Investing in helium presents a strategic opportunity as industries rely increasingly on this finite and irreplaceable gas. The closing of U.S. reserves, geopolitical shifts, and rising demand underscore the need for diverse supply sources. For investors, helium offers a combination of strong demand, constrained supply, and price stability, positioning it as a valuable long-term asset.

With a prime acreage position, cutting-edge extraction technology, and a strategic partnerships Georgina Energy, Helium One, Royal Helium and Desert Mountain Energy among other helium operators are well positioned to capitalize on the increasingly favorable helium macro backdrop. As the supply crunch intensifies, the investment case for helium continues to strengthen.

_References:

1. _{Crux Investor (August 2024). Helium Scarcity Sparks Price Rise & New Investment Opportunity}
2. _{Shokri, U. (March 2021). Gulf International Forum. A Rising Role: Qatar and its Competition in the Global Helium Market}
3. _{U.S. Geological Survey (January 2024). Mineral Commodity Summaries. Helium Statistics and Information}
4. _{Canada Energy Regulator (May 2022). Energy Analysis. Market Snapshot: Helium – it’s Not Just for Balloons}
5. _{Reuters (Septemer 2024). Helium demand to double by 2035, tracking chip production boom}
6. _{Bettenhausen, C (March 2022). Chemical ad Engineering News. War in Ukraine makes helium shortage more dire}
7. _{Government of Saskatchewan (November 2021). Government of Saskatchewan Launches Helium Action Plan}