Brian Zinchuk is editor and owner of Pipeline Online
Independent Well Servicing worked on Royal Helium’s Climax-3 well in early August. Photo by Brian Zinchuk
REGINA – On Nov. 15, Saskatchewan Minister of Energy and Resources Bronwyn Eyre announced a Helium Action Plan, meant to foster further development of the industry. The announcement took place in the Legislature, and had invited representatives from the helium industry.
Incentives
Patty Thomas, vice president of geosciences for North American Helium, said the incentives offered by the province are “really, really important.”
“We operate in southwest Saskatchewan, and that is a full-on exploration basin. And so, our original investors, which are now six years in, are from the mining industry with a mentality that it’s going to take a long time to get your money back. And indeed, we’ve only started to be in a cash flow position since 2020. So, when we begin, there’s a cut, there’s your cash inflow. Exploration wells are drilled at a rate of one or two per year, and then four per year, then 12 per year. We’re getting to 20 per year. But without that investment to drill a well, that doesn’t produce, and then drill another one that might not produce, and then maybe by the time you got to the sixth one, it’s a producer; each of these wells are a million dollars to drill. It’s a big deal. It takes a long time to get there.”
Patty Thomas, vice president of geosciences for North American Helium. Photo by Brian Zinchuk
When asked if Royal would be operating without incentives, Royal Helium president and CEO Andrew Davidson responded, “We would be in the exploration phase, but the fact that they are here, now, encourages far more entrants into the space, which is going to allow for development on a rapid scale, which gets back to cash flow coming back to the province, and the citizens of Saskatchewan, to the royalty stream.
“And there was a question about, about the royalty stream, the four and a quarter percent. It is one of the single most important factors to let people explore in Saskatchewan, at least initially, now the North Americans has done what they’ve done, and we’re doing what we’re doing. It’s getting a lot of attention on its own, but it is globally competitive, in an industry that’s also globally competitive; significantly lower than in the US the same royalty rate is in Alberta.”
Davidson said without the incentives, Saskatchewan likely couldn’t grow to the 10 per cent market share the provincial government is aiming for. The incentives are key for liquefaction, which is important for broader exports, especially for Asian markets.
Royal Helium president and CEO Andrew Davidson took questions from reporters on Nov. 15. Photo by Brian Zinchuk
He said, “So having these incentives here, encouraging groups like ours, and North American build facilities to actually upgrade gas here is a huge win and goes a long way to getting more production online. It’s really an economic argument. The price of liquid helium is larger than the price of the gaseous helium by a factor of two or three times. So, it makes the investment worth it. But it is a large, upfront cash risk to build those facilities and the support from programs like this helps to ease that.”
“The most important part of the plan is the fact that it covers everything from exploration through to export, most incentive programs that I’ve seen in other parts of the world or other resources, cover building facilities, which puts the cart well before the horse. You need the exploration here to develop the industry that eventually builds the refining. So that’s very important to us. Again, we would be doing the exploration about it. But the fact that it’s here encourages other players into the market, and grows the sector, which again, is in everyone’s best interest, including us.”
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Davidson said Royal engineering for a liquefication plant is taking place now, but they are a number of years from constructing it. “We’re looking at building a facility somewhat similar to North Americans, which has the ability to add a liquefaction facility on the back end of it. There are no liquefiers in Canada, there are a few in the U.S.”
Revenue
Asked about future royalties for the province, from helium, Eyre said, “It depends on the scale we expand to. But it’s very, very promising in terms of bottom line, the value of helium, and the value of helium that is set to also expand massively by 2030 in the next few years.”
Will the province maintain stability on royalty rates, as it has with oil and gas?
Eyre said, “Certainly, at this point, there’s no reason to move off the 4.25 per cent. I think part of the regulatory streamlining and work that we want to do is just to make sure that everything is as aligned as it could be. So, for example, right now, helium, regulatorily-speaking, is a bit of an add-on to some just existing oil and gas regulations. So, we can do more to bring it into the fold, regulatorily-speaking, admin processing wise, and then around the geosciences data, of course, that’s all work that needs to be done, now, from the regulatory perspective. But in terms of the 4.25, there’s no plan to alter that. But there are streamlining regulatory things we can do to make that work better, within the overall context of our oil and gas regulations.”
Minister of Energy and Resources Bronwyn Eyre. Photo by Brian Zinchuk
Eyre was asked why it was necessary to have incentives, if helium’s prospects are looking promising. She replied, “Government money follows, it doesn’t lead. So, for example, with the North American Helium project, they invested $10 million. That was the minimum they had to invest. It’s an infrastructure incentive that follows that commitment. And that’s how those incentives are set up.
“They’re very, they’re very common sense. They’re very well received by the sector, because not all areas in the sector produce royalties, for example. And so, you can transfer the credits, making that almost kind of a monetary value, obviously, is very, very well-received, because it has a tangible efficient effect on getting some of these things going.”
She pointed to the Moose Jaw refinery as an example, on the oil side.
Eyre said there is a huge increase in demand for helium, but low supply. “That’s why the market is so, so optimistic for helium,” she said. “In light of all the global demand supply realities we’re seeing, and obviously the interest from our companies who are here, they see it as the moment for helium. And that’s, you know, broadly accepted as a as a market reality around this resource.
There are nine active helium wells in Saskatchewan right now, she said, and 24 “in the drilling process.”
Eyre said she has asked if 150 wells is a realistic number, and was told yes, it is.
Value-added facilities will not all be the scale of what North American Helium has done, she noted. There will be smaller facilities, and even modular facilities. Eyre said the big item is liquefaction. “Our big push, as a province, is really to try to now get the companies who are here today and others who will come to be attracted to the province to get behind a liquefaction facility,” she said.
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- 0053 Kingston Midstream Westspur Alameda Click0053 Kingston Midstream Westspur Alameda Click
- 0082 CsHM 2024 Pipeline0082 CsHM 2024 Pipeline
- 0077 Caprice Resources Stand Up For Free Speech0077 Caprice Resources Stand Up For Free Speech
- 0076 Latus only0076 Latus only
- 0061 SIMSA 2024 For Sask Buy Sask0061 SIMSA 2024 For Sask Buy Sask
- 0055 Smart Power Be Smart with your Power office0055 Smart Power Be Smart with your Power office
- 0051 JML Hiring Pumpjack assembly0051 JML Hiring Pumpjack assembly
- 0049 Scotsburn Dental soft guitar0049 Scotsburn Dental soft guitar
- 0046 City of Estevan This is Estevan0046 City of Estevan This is Estevan
- 0041 DEEP Since 2018 now we are going to build0041 DEEP Since 2018 now we are going to build
- 0032 IWS Summer hiring rock trailer music
- 0022 Grimes winter hiring
- 0021 OSY Rentals S8 Promo
- 0018 IWS Hiring Royal Summer
- 0013 Panther Drilling PO ad 03 top drive rigs
- 0011
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- 0002 gilliss casing services0002 gilliss casing services
- 9002 Pipeline Online 30 sec EBEX9002 Pipeline Online 30 sec EBEX
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This is Part 2 in a series regarding helium development in Saskatchewan.