The ‘Helium Cliff’ is approaching and could hit as early as 7th October 2013, according to MATHESON’s Phil Kornbluth, discussing this fragile market at gasworld’s North American conference today in Miami, Florida.
The ‘fiscal cliff’ has dominated headlines both in the US and across the globe, but as Kornbluth explained, in the gases industry the Helium Cliff is also a major cause for concern.
“It’s been a relatively hot topic of late because of the worldwide shortages that have been going on, so I think there’s probably more interest in the helium business than there usually is right now,” he explained.
“While there is all this talk about this Fiscal Cliff, which may not happen, the helium cliff is a cliff.”
The recent Helium Shortage 2.0 has never really gone away and there has still been no new volume coming on-stream either. All of which appeared to have left the market at something of an impasse in 2012.
Compounding current shortages are growing fears over the future management and stewardship of the Federal Helium Reserve in Amarillo, with no new legislation currently in place for this resource and the possibility that funding for the BLM’s helium program will run out at the end of 2013’s third quarter.
This, Kornbluth explained, provides a potential timeline for the approaching Helium Cliff. “The exact date of the Helium Cliff is October 7th 2013; if there is no new legislation, then this 2.1 BCF supply of crude helium feedgas will go off the market and make this current shortage look like a mini shortage,” he said. “Up to 4 BCF/year of capacity linked to the BLM Pipeline could be at risk.”
‘Raise your hands’
In an engaging break in his presentation, Kornbluth asked all in the room to raise their hands if they had been affected by the helium shortage; during which the room became a swathe of raised forearms.
He then proceeded to dispel some of the myths about the global helium shortages and give some projections about the outlook for the market.
“We believe, at MATHESON, that the global helium supply chain has become permanently less reliable, more or less”
“One of the big bits of misinformation that has been put out there is about demand growth – the truth is that the shortages have come from outages in the market rather than demand growth. Demand growth has remained relatively modest,” he explained.
“There are 15 sources in the world, there’s not a lot. Various sources have been impacted by one outage or another, and ExxonMobil – which operates one of the biggest sources, in Wyoming – takes a planned shutdown every summer.”
“It’s all about supply, it’s not about demand. We believe, at MATHESON, that the global helium supply chain has become permanently less reliable, more or less. There has been a loss of flex capacity previously provided by the BLM pipeline, and increased dependence on LNG-based sources.”
“Helium supplies,” he continued, “have focused on increasing prices and optimising customer portfolios. Customers are placing increased emphasis on security of supply and showing increased interest in helium recycling.”
An end in sight?
“So when will the shortage end?” Kornbluth asked. “Well we’re saying we think the shutdown could start subsiding in the third quarter of the year (2013) and the market should return to balance by the end of 2013.”
“Three new sources with a total capacity of 1.8 BCF will enter the market in 2013, up to a 25% addition to global supply. As production from the new sources increases, the shortage will gradually subside.”
Looking ahead, Kornbluth cautioned that despite this new capacity coming on-stream, there will not be a ‘glut’ of helium lying around in the market. In fact, there is first the current deficit to be balanced out.
He said, “So we have all this new supply coming on, up to a 25% addition to capacity, so what’s going to happen? MATHESON is not actually expecting a glut of supply, as new supply is required to offset up to 1.5 BCF of market deficit.”
“Our view is that market prices will stabilise, product from Qatar will take the lion’s share of Middle East and South Asian markets – and increased market share in other Asian countries. What that means is that previously exported US supply will be pushed back to the US, and the BLM pipeline will get back in the game and provide a little bit of flex capacity until new sources are fully absorbed.”
With a view to 2020, Kornbluth projected that Russian production is going to be a big factor in the market from 2018-2020, there will be little or no demand growth in North America, and only slow growth in Europe and Japan, and how it is likely that the US will become a net importer of helium by 2020.
In closing, he reassured, “Another one of the fallacies in the media is that ‘oh my god, the world is running out of helium’. It isn’t - the helium is there, it’s about how we recover that and utilise it.
Watch this space…
Find out more about the Helium Cliff, how these market dynamics came to be, the future projections and much more in the January 2013 issue of gasworld magazine.
Coming soon, including interviews with the BLM, MATHESON, Beroe, Inc. and much more.