Can Russia Become A Major Player In Helium Markets?
By Fares Kilzie - Jun 23, 2021
This month, Gazprom launched the first of six lines of the Amur Gas Processing Plant (GPP). By 2025, when the plant reaches its design capacity, it will not only become the largest Russian site for natural gas processing (42 billion cubic meters per year) but will also increase Russia's share in the global helium market. Apart from ethane, liquefied petroleum gases and pentane-hexane fraction, the bordering China Amur GPP will be capable of producing up to 60 million cubic meters of helium annually. To make it clear, in 2020 Russia produced 4.5 million cubic meters (mcm) of helium, much less than the United States (74 mcm, including helium from the Cliffside storage) and Qatar (45 mcm, according to the US Geological Survey).
A window of opportunity Gazprom made the final investment decision on the Amur GPP project in October 2012, also approving an investment plan for the Chayandinskoye field, which later supplied the Power of Siberia pipeline with natural gas. A year later, the US Congress passed the Helium Stewardship Act (2013) that limited withdrawals from the Cliffside helium storage facility. In 2012, 60 mcm of helium were taken from this storage, while in 2020 this figure did not exceed 13 mcm, according to the US Geological Survey. As a result, over the same period, the United States reduced its helium supply by more than 40% (from 133 million to 74 mcm, as follows from USGS data), which could not but create opportunities for other supplying countries, whose global share has increased from 24% in 2012 to 47% in 2020. Qatar, for example, has more than tripled its helium production between 2012 (13 mcm) and 2020 (45 mcm).
Related: How Much Oil Can Saudi Arabia Really Produce?
However, this did not prevent the risk of a global shortage, as evidenced by rising prices. According to the UN/ WTO International Trade Center, in 2020, the average US export price for helium increased by 21%, from $3.5 to $4.2 per cubic meter, while in November 2020 it exceeded $4.9 per cubic meter. The reason is the growth in demand, especially in Asia: in 2020, the total supply of helium from the United States to Japan, China and South Korea exceeded the 2017 level by 40% (43.4 million cubic meters versus 31.0 million cubic meters). The demand is driven by the market for magnetic resonance imaging (MRI), which is one of the key segments of helium consumption. From 2016 to 2019, sales of MRI equipment in Japan, China and South Korea increased by 24% in total (to $1.1 billion, according to Mordor Intelligence), and they have not peaked yet: in 2019, in terms of the average number of MRI units, South Korea was almost half the size of the United States (30 versus 55 units per million population, according to OECD data). Another driver is the aerospace industry, which accounted for 9% of global helium demand on the eve of the pandemic (versus 26% for healthcare, 14% for electronics and 51% for all other sectors, according to Mordor Intelligence). Here, the use of helium will be spurred on by the launch of a Chinese orbital station, along with SpaceX's ambitious plans and greater availability of space tourism. Between 2016 and 2019, global helium demand within this sector grew by 9%, while by 2024 it will increase by another 21%, according to the Mordor Intelligence forecast. The same goes for electronics, where helium is used to cool smartphones. Between 2016 and 2020, the global number of smartphone users grew by two thirds, from 3.7 billion to 6.1 billion. This growth is unlikely to stop, given that by 2024 the number of mobile devices (including tablets and IoT devices) will increase from to 14 billion to 17.7 billion, according to the Statista forecast.
Related: Big Oil Backs $100 Crude Narrative
Therefore, global helium demand will continue to grow: by 2024 it will increase by 21% compared to 2019 levels, as follows from the forecast provided by Mordor Intelligence before the pandemic began. Moreover, the actual increase may turn out to be even more significant, given the explosive growth in demand for MRI during the pandemic. This is why helium producers have been among the favorites of the stock market over the past year and a half: according to Bloomberg, from early January 2020 to mid-June 2021, the market capitalization of Helium One (UK) almost tripled (to $154.1 million). For Blue Star Helium (Australia), it grew 9 times (up to $32.9 million), and for RHC Helium (Canada) – 86 times (up to $60.5 million).
A timeline for new projects
For the same reason, the Amur GPP will not be the only new helium production site in Russia. To date, the only Russian site is the Orenburg Helium Plant, which has cut production from 5.1 mcm to 4.5 mcm between 2017 and 2020. But already in 2022, the Irkutsk Oil Company (INK) intends to commission a plant with an annual capacity of 7.5 million cubic meters of helium, based at the Yarakta field in Eastern Siberia. Following this, in 2025, INK will launch another helium plant (with an annual capacity of 4.5 mcm), which will process gas from the Markovskoye field.
In Yakutia, with the support of the Far East Development Corporation, a helium storage facility with a capacity of 40 mcm will be built by 2030. It will be filled with helium from the Otradninskoye and Srednebotubinskoye fields (East Siberia), whose operators – Sakhatransneftegaz, as well as Rosneft, RNG and Alrosa – may undertake a two-stage helium project. At the first stage, helium capacities with an annual volume of 0.3 to 1.2 mcm will be built, and at the second stage their volume will be increased to 8 – 12 mcm.
In turn, regulatory bodies, following the needs of key market players, are going to include obligations to extract helium reserves in licenses for natural gas fields (to avoid the annual loss of up to 15 mcm of helium), as well as to establish both the state and commercial reserves of helium concentrate (to meet the long-term needs of helium-consuming industries and to hedge export risks). This will help Russian producers increase the annual helium capacity to more than 80 mcm – to a level, that is excessive for the Russian market, given that annual domestic demand has never exceeded 4.8 mcm, and in 2020 it amounted to 4 mcm, as follows from the Analytical Center of the Fuel and Energy Complex of the Russian Ministry of Energy. That is why new Russian helium projects will be export-oriented.
More than a timely decision
And this is good news for the global market, given the already mentioned risk of a global shortage. In fact, Russian producers will enter the niche formed following the reduction in the US supply. Between 2012 and 2020, the latter fell by 59 mcm, which is almost equivalent to the helium capacity of the Amur GPP. Therefore, the growth of Russian exports will not result in either a price collapse or a surplus on the world market. On the contrary, Russia will become the savior of the global market, able to meet the needs of European and Asian consumers thanks to its dispersed production facilities and the associated logistic benefits.
Linde has already taken advantage: in 2018, the German industrial gas producer signed a contract to purchase helium from the Amur GPP, having previously become its licensor. Hopefully, other key market players will follow this path.
By Fares Kilzie for Oilprice.com
https://oilprice.com/Energy/Crude-Oil/Can-Rus...rkets.html
By Fares Kilzie - Jun 23, 2021
This month, Gazprom launched the first of six lines of the Amur Gas Processing Plant (GPP). By 2025, when the plant reaches its design capacity, it will not only become the largest Russian site for natural gas processing (42 billion cubic meters per year) but will also increase Russia's share in the global helium market. Apart from ethane, liquefied petroleum gases and pentane-hexane fraction, the bordering China Amur GPP will be capable of producing up to 60 million cubic meters of helium annually. To make it clear, in 2020 Russia produced 4.5 million cubic meters (mcm) of helium, much less than the United States (74 mcm, including helium from the Cliffside storage) and Qatar (45 mcm, according to the US Geological Survey).
A window of opportunity Gazprom made the final investment decision on the Amur GPP project in October 2012, also approving an investment plan for the Chayandinskoye field, which later supplied the Power of Siberia pipeline with natural gas. A year later, the US Congress passed the Helium Stewardship Act (2013) that limited withdrawals from the Cliffside helium storage facility. In 2012, 60 mcm of helium were taken from this storage, while in 2020 this figure did not exceed 13 mcm, according to the US Geological Survey. As a result, over the same period, the United States reduced its helium supply by more than 40% (from 133 million to 74 mcm, as follows from USGS data), which could not but create opportunities for other supplying countries, whose global share has increased from 24% in 2012 to 47% in 2020. Qatar, for example, has more than tripled its helium production between 2012 (13 mcm) and 2020 (45 mcm).
Related: How Much Oil Can Saudi Arabia Really Produce?
However, this did not prevent the risk of a global shortage, as evidenced by rising prices. According to the UN/ WTO International Trade Center, in 2020, the average US export price for helium increased by 21%, from $3.5 to $4.2 per cubic meter, while in November 2020 it exceeded $4.9 per cubic meter. The reason is the growth in demand, especially in Asia: in 2020, the total supply of helium from the United States to Japan, China and South Korea exceeded the 2017 level by 40% (43.4 million cubic meters versus 31.0 million cubic meters). The demand is driven by the market for magnetic resonance imaging (MRI), which is one of the key segments of helium consumption. From 2016 to 2019, sales of MRI equipment in Japan, China and South Korea increased by 24% in total (to $1.1 billion, according to Mordor Intelligence), and they have not peaked yet: in 2019, in terms of the average number of MRI units, South Korea was almost half the size of the United States (30 versus 55 units per million population, according to OECD data). Another driver is the aerospace industry, which accounted for 9% of global helium demand on the eve of the pandemic (versus 26% for healthcare, 14% for electronics and 51% for all other sectors, according to Mordor Intelligence). Here, the use of helium will be spurred on by the launch of a Chinese orbital station, along with SpaceX's ambitious plans and greater availability of space tourism. Between 2016 and 2019, global helium demand within this sector grew by 9%, while by 2024 it will increase by another 21%, according to the Mordor Intelligence forecast. The same goes for electronics, where helium is used to cool smartphones. Between 2016 and 2020, the global number of smartphone users grew by two thirds, from 3.7 billion to 6.1 billion. This growth is unlikely to stop, given that by 2024 the number of mobile devices (including tablets and IoT devices) will increase from to 14 billion to 17.7 billion, according to the Statista forecast.
Related: Big Oil Backs $100 Crude Narrative
Therefore, global helium demand will continue to grow: by 2024 it will increase by 21% compared to 2019 levels, as follows from the forecast provided by Mordor Intelligence before the pandemic began. Moreover, the actual increase may turn out to be even more significant, given the explosive growth in demand for MRI during the pandemic. This is why helium producers have been among the favorites of the stock market over the past year and a half: according to Bloomberg, from early January 2020 to mid-June 2021, the market capitalization of Helium One (UK) almost tripled (to $154.1 million). For Blue Star Helium (Australia), it grew 9 times (up to $32.9 million), and for RHC Helium (Canada) – 86 times (up to $60.5 million).
A timeline for new projects
For the same reason, the Amur GPP will not be the only new helium production site in Russia. To date, the only Russian site is the Orenburg Helium Plant, which has cut production from 5.1 mcm to 4.5 mcm between 2017 and 2020. But already in 2022, the Irkutsk Oil Company (INK) intends to commission a plant with an annual capacity of 7.5 million cubic meters of helium, based at the Yarakta field in Eastern Siberia. Following this, in 2025, INK will launch another helium plant (with an annual capacity of 4.5 mcm), which will process gas from the Markovskoye field.
In Yakutia, with the support of the Far East Development Corporation, a helium storage facility with a capacity of 40 mcm will be built by 2030. It will be filled with helium from the Otradninskoye and Srednebotubinskoye fields (East Siberia), whose operators – Sakhatransneftegaz, as well as Rosneft, RNG and Alrosa – may undertake a two-stage helium project. At the first stage, helium capacities with an annual volume of 0.3 to 1.2 mcm will be built, and at the second stage their volume will be increased to 8 – 12 mcm.
In turn, regulatory bodies, following the needs of key market players, are going to include obligations to extract helium reserves in licenses for natural gas fields (to avoid the annual loss of up to 15 mcm of helium), as well as to establish both the state and commercial reserves of helium concentrate (to meet the long-term needs of helium-consuming industries and to hedge export risks). This will help Russian producers increase the annual helium capacity to more than 80 mcm – to a level, that is excessive for the Russian market, given that annual domestic demand has never exceeded 4.8 mcm, and in 2020 it amounted to 4 mcm, as follows from the Analytical Center of the Fuel and Energy Complex of the Russian Ministry of Energy. That is why new Russian helium projects will be export-oriented.
More than a timely decision
And this is good news for the global market, given the already mentioned risk of a global shortage. In fact, Russian producers will enter the niche formed following the reduction in the US supply. Between 2012 and 2020, the latter fell by 59 mcm, which is almost equivalent to the helium capacity of the Amur GPP. Therefore, the growth of Russian exports will not result in either a price collapse or a surplus on the world market. On the contrary, Russia will become the savior of the global market, able to meet the needs of European and Asian consumers thanks to its dispersed production facilities and the associated logistic benefits.
Linde has already taken advantage: in 2018, the German industrial gas producer signed a contract to purchase helium from the Amur GPP, having previously become its licensor. Hopefully, other key market players will follow this path.
By Fares Kilzie for Oilprice.com
https://oilprice.com/Energy/Crude-Oil/Can-Rus...rkets.html
