Tumbleweed Midstream, LLC has struck a new $500m, ten-year helium sales agreement with a global Tier One helium supplier.
The new take-or-pay agreement locks in the customer for Colorado, US-based Tumbleweed’s helium production until the end of 2030.
Specific terms of the agreement are undisclosed, but Tumbleweed estimates the value of the overall contract could exceed $500m according to a statement from the company. Final contract value will depend on the volume of helium produced by the Ladder Creek plant and delivered between now and year-end 2030.
“We are extremely pleased to be able to announce a new long-term contract with one of the world’s top tier suppliers of helium to global markets,” said Tumbleweed Midstream Founder and CEO Durell Johnson.
“With much speculation in the helium market related to new supplies coming on from Russia and Qatar in 2021 and 2022, this new contract provides the stability we need to ensure our producers that their helium will be sold at fixed prices.”
A unique aspect of the agreement gives Tumbleweed the option to sell up to 10% of its helium production to third-party buyers who need to make non-scheduled purchases of helium on the open market.
“This is significant because every molecule of available helium anywhere in the world is under contract,” said Johnson.
“We have reserved a portion of our annual production specifically to help suppliers who encounter a supply hiccup and suddenly need to buy helium to satisfy customer contracts. Because there is no established marketplace where you can buy helium, we want helium buyers to know they can fill a temporary supply interruption with a single phone call to Tumbleweed Midstream.”
After it acquired the Ladder Creek Helium Plant and Gathering System - located near Cheyenne Wells, Colorado - in December 2019, Tumbleweed revamped its natural gas producer agreements and added new gathering and processing customers. These actions increased natural gas input to the plant in 2020, underpinning a fourfold increase in helium production.
Tumbleweed expects its Ladder Creek Helium Plant will ship more than 100 trailer loads of processed liquefied helium in 2021. A trailer of liquefied helium holds approximately 1 million cubic feet of the inert gas.
Natural gas wells associated with a new 15,000-acre dedication, scheduled to be drilled and connected to Tumbleweed’s Ladder Creek gathering system in Q1 2021, will bring more raw helium into the plant for processing.
“Continued growth will come from natural gas producers right here in our backyard,” Johnson said.
“We recently executed a new 15,000-acre dedication with a producer in Kansas and expect to see new drilling activity that will bring additional production to the plant by the end of Q1.”
Current processing capacity at the Ladder Creek cryogenic processing plant is 38 million cubic feet per day (MMcf/d), expandable to 57 MMcf/d. The company plans to initiate a plant expansion later this year.