With the news that the US House of Representatives has unanimously backed measures that will re-authorise the Federal Helium Program, it seems that the market is able to take a step back from the edge of the ‘Helium Cliff’.
It was announced yesterday that the House passed the resolution that would suspend its procedural rules and adopt the Senate version of legislation, to thereby re-authorise the Federal Helium Program. The vote was unanimously in favour at 367 - 0.
This eliminates the need for a conference committee, as now both the House and Senate have backed the Bill and all that is left is for it to travel to the White House for President Obama’s signature. gasworld understands the BLM program will continue to offer helium from the stored reserves, albeit under different terms, until it reaches the strategic level of 3 BSCF, at which time the BLM will only sell to Federal Helium Users.
The news is likely to be met with widespread satisfaction from both helium suppliers and end-user industries alike. There had been fears that the Federal Helium Reserve, operated by the US Bureau of Land Management (BLM), would stop selling commercial helium this October (7th) as it would have technically paid off its debt and funding was not provided for to take it beyond that point – a move that would cut access to half of the domestic (US) supply and cause significant disruption to the helium supply chain.
“With no new legislation in place, and the possibility that funding for the BLM’s helium program would run out at the end of 2013’s third quarter, it had been feared that up to 4 BCF per year of capacity could be at risk…”
With no new legislation in place for this resource, and the possibility that funding for the BLM’s helium program would run out at the end of 2013’s third quarter, it had been feared that up to 4 BCF per year of capacity linked to the BLM Pipeline could be at risk next month.
Indeed, at the first-ever Global Helium Summit held in London this summer, Air Products’ Director of Helium Sourcing and Supply Chain, Walter L. Nelson, reflected on the important and serious nature of legislation to complete the privatisation of the Federal Government’s helium stockpile. He had commented, “This recent history of supply problems proves one thing: if the US Government doesn’t take legislative action soon to allow for continued operation of the US BLM system, the current helium shortages will child’s play compared to the dire situation that helium users will face.”
Nick Haines, Head of Global Helium Source Development at Linde Global Helium, had also discussed US helium and Government status and, when comparing the two proposed structures or drafts for future regulation of the US Federal Helium Reserve, offered, “Overall, our view is that the House Bill could be quite disruptive to the industry; the Senate Bill, with some revisions, could be workable.”
Yesterday’s unanimous backing by the US House of Representatives is a major development in the helium market, resolving part of a potential crisis in the market.
Gasworld understands that global helium historical demand growth rates have been 4-5% per year, led by Asia at 6-10% annually, however, future global growth rates are more difficult to predict as there have been technology shifts and alternative gases used in the past three years due to the prolonged shortage of helium supply and sharp increases in pricing that resulted from the shortage.
Further, it has been estimated that around 75% of the helium produced today comes from natural gas production in the US, with approximately 130 million cubic meters (4.6 Bn SCF) of helium produced in the US each year, of which 40% is sourced from the US BLM helium reservoir in Amarillo, Texas.
The newly passed Helium Stewardship Act (HSA) will provide continued stable access to the taxpayer-owned helium supplies while industry starts-up and continues to develop new helium supplies. In this respect, it represents the market taking one step back from the brink of the so-called ‘Helium Cliff’.
“The newly passed Helium Stewardship Act will provide continued stable access to taxpayer-owned helium supplies while industry starts-up and continues to develop new helium supplies…”
But this is also not the end of a currently tight helium market – gasworld understands that shortages still exist around the world, while it is widely known that ExxonMobil performs an annual maintenance shutdown at its Shute Creek Gas Plant in Wyoming, a resource that until recently was thought to contribute more than 20% of global helium supply. At the same time, the start of production from new sources in Qatar, Algeria and the US is thought to have either been delayed or is ramping up slower than anticipated.
The security of the Federal Helium Reserve merely averts an even bigger crisis.
Even with the new helium legislation about to be passed, it is expected that the Federal Helium Reserve will be depleted (except for a 3 BCF stockpile) by 2020, if not before. Further, before then, gasworld understands that the recovery of helium from the Federal Reserve is becoming more difficult as the reservoir depletes and the pressure declines.
The main players within the helium business know that the BLM is on a limited extension and other fields are depleting, so it is essential that the current installed capacities around the world work to near-nameplate capacity and, by 2020, that additional new sources (such as in Siberia, Russia) are exploited to ensure continued supply to the global market.
A delicate supply-demand balance is nothing new for the global helium market and will likely continue. The story is far from over. What the passing of the stewardship Bill does bring is a soft landing for the industry, having faced a potential scenario of severe impacts to both the helium business and end-user industries and processes, respectively.