Brian Zinchuk is editor and owner of Pipeline Online
This was the Weil Helium Mankota site during its grand opening in August, 2016. Photo by Brian Zinchuk
DALLAS – Back in 2015 or 2016, this reporter got a phone call from a man with a Texas accent.
The voice on the other end of the call was that of Wheeler “Bo” Sears, and he wanted to talk about helium, in Saskatchewan, of all places.
This was long before helium started to take off in this province, and before the Minister of Energy and Resources said this past November Saskatchewan wants to make up 10 per cent of the global supply.
At the time Sears was president of Weil Helium, part of Weil Group. Sears had delivered the Mankota project to the Weil Group who subsequently re-completed two wells just south of the village of Mankota, and was building a helium processing plant. He explained many of the fundamentals of the helium industry, which he could do, since he literally wrote the book about it, called Helium: The Disappearing Element. You can find it on Amazon.com, but not Amazon.ca.
He explained how the helium molecule was so small, no matter what vessel mankind makes to contain it, the helium will quite literally pass through the atoms that make up the walls and seals. Therefore, any product or process that requires helium must be continually replenished. Helium is critical for magnetic resonance imaging (MRIs), rocketry, silicon wafer and fiber optic cable manufacturing, and a slew of other high-tech applications. In many of these applications, there is no substitute.
Sears also explained that helium needs to be processed to what is referred to as five nines, or 99.999 per cent purity, to achieve its highest value. Lower purities might be sufficient for balloons and some industrial uses, but not for the ones with that are worth the most.
Also, the United States Bureau of Land Management, which had a controlling interest in one of the largest reserves of global helium supply, had been mandated by Congress to get out of the helium market, allowing helium to become more of a free market. That was driving demand, and prices were going up. As a result, his company was developing its property in Mankota.
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That was five years ago. Weil opened its processing plant at Mankota in 2016. Sears left Weil two years ago to start his own venture, Dallas-based Hereford Resources LLC, which focuses on helium and hydrogen development. Pipeline Online spoke to him by phone on Dec. 17. This was a day after he was quoted by Wired.com in an article called, “The Race to Find ‘Green’ Helium.”
“It was time for me to move on. I took a year off doing research on other helium targets and hit the gas on acquiring the top targets the following year,” he said.
Early mover here not here now
Sears said he doesn’t know what Weil is doing in Saskatchewan now. The last he heard, they were still producing helium, trucking it to the U.S. to be liquified and sent to Asia. But he hasn’t heard anything since he left. Weil had initially recompleted their first two wells, and drilled a third after he left the company.
But he was a bit disappointed with the Saskatchewan government, saying they stymied Weil’s efforts at expansion in this province on acreage adjacent to their existing leasehold.
“I am presently not doing anything in Saskatchewan. Most of my projects are in the United States. When I was with Weil Group, we tried to acquire more land, and Saskatchewan turned us down; just flatly turned us down, said we’re not going to lease you anymore helium lands. Meanwhile, everybody else is getting all these other lands; speculators. We were already building a plant. So, we just presumed that they didn’t like us gringos, Americans, or whatever. So, Weil made the shift to Alberta and then that’s when I left Weil Group. Weil was working with a third party consulting firm that identified a few projects there, so I just let them chase their Alberta deals and I just moved south of the border,” he said.
“We tried to lease some adjacent acreage. They turned us down.”
He said they were shocked.
“They said until we get moving, they’re not going to lease us any more stuff. So anyway, we saw that as writing on the wall, that perhaps Saskatchewan is not the right place for non-Canadians to work. Because in the meantime, you know, people are just gobbling up that two cents an acre. What they don’t realize is that although they may be able to pick it up for $.02 an acre, they still have to pay a lot of money just to keep that stuff intact after a couple years. A lot of geological and geophysical monies have to be spent in order for the Government to maintain those leases.”
Bo Sears. Photo by Brian Zinchuk
He said helium acreage at two cents per acre is a legacy price from 1964. That’s the only reason other players have picked up so much acreage, he said, “because it’s so cheap.”
“That’s in Saskatchewan.”
Indeed, each of the four active helium exploration players in Saskatchewan have, to this point, expressed they’ve picked up sizable acreage across southern Saskatchewan, as much as 5 million acres in North American Helium’s case. Helium Evolution has locked up 3 million acres. Global Helium says they have 1.1 million acres, while Royal Helium says they have 863,000 acres.
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At two cents per acre, companies are able to buy massive blocks for very little money, he said. For instance, five million acres only costs $100,000 – and most of those acres will never be developed. In the cases of public companies, it makes for great press releases but seldom are the readers aware of how cheap this stuff is, he said.
Sears said he’s not interested in the Canadian market, saying, “I have too many opportunities to chase down here, just too much to look at here on this side of the border.”
“I’m working everywhere. Montana, Utah, Colorado, New Mexico, pretty much the whole, you know, mid continent, Front Range area,” he said.
Small, discrete features
Regarding the Canadian geology, Sears said, “The stuff they’re going after there are smaller, discrete features. We learned in Mankota that the small discrete features just don’t last as long as you think they would. And so, you really have to hit these little anticlines, and they just don’t hold a whole lot of helium. Now, it’s only a matter of time before someone has the grand discovery, but so far, it hasn’t happened yet.”
“Battle Creek, North American Helium’s field, it’s a small field. We looked at that long before they were involved because it was published back in the 60’s as potential for the province. It was just a smaller little anticline, so we passed on that. Swift Current was pretty small, too. There was a group called Pan American who drilled a well at Swift Current that preceded me by several years. I would say if there’s a first mover in Saskatchewan, Pan American was it.
“It’s still very risky endeavor.”
Sears said he’s scattered all across the Rocky Mountain area but, so far, has not overlapped with current exploration trends.
Sears said he’s “soon to drill,” but doesn’t want to say exactly where at this point.
Percentages and volumes count
Asked about how much per cent helium cut makes a well economical, Sears explained it’s more that just the percentage – it’s the volume behind it.
“It’s a difficult question to answer because it depends on the volumes behind it, and the reserve behind that. So ,you know, if I’m only producing 500 MCF of raw gas per day, and it’s got three per cent helium, that’s still not a whole lot of helium. It really depends on what the reserve is and what the flow rates are. You know, those wells in Mankota were blowing off like jet engines – the absolute open flow on those things was 120 million cubic feet of gas a day, raw gas.”
He continued, “That made that project very economical. But if you’re taking low volumes of gas, it’s just difficult to make it work economically, because if you have to be at one or two per cent, you have to put a membrane on there to run through a PSA (pressure swing adsorption) plant, because PSAs are designed to handle higher concentrations of helium. So, you have an added expense of a membrane unit. And then you got to purify the stuff, which is another problem, depending on where you are. It’s very expensive to haul gaseous helium, no matter where you are. And it has to be ultrapure to sell it to people who are going to use it. Most of that helium up there is spoken for to the major industrial gas companies, I believe.”
When you cut the ribbon on the grand opening of a helium plant, of course you would use balloons to lift the ribbon away. Bo Sears can be seen on the left. This was the grand opening of the Weil Helium Mankota plant, when Sears was president of the company at the time. Photo by Brian Zinchuk
As for purity, he said, “You need to be able to ship five nines. Otherwise, you’re going to contaminate a tube trailer, because in order to clean those things, you have to vacuum it out. And that’s a timely, costly thing.
“If you’re just producing, say 99.0 (per cent), there’s not a place to go with it. There’s not a big balloon market in Canada. But if there was, you’d fill that up with one project.”
Future market
Asked what the market looks like for the next few years, with a lot of companies now starting to punch holes, Sears responded, “I have always liked the North American helium market. And the reason why is because there’s less geopolitical concerns and we’re still a large consumer of helium. If Russia invades Ukraine, for instance, it’s going to be problematic getting helium out of the Siberia, right? Qatar had suffered that blockade, at one time, by Saudi Arabia. So you know, these large foreign producers of helium are not without geopolitical risk. So, pure reliance on these countries for helium poses some severe potential supply risks.
“I still like to North American helium market. It is tough to do small, little features, you know, say a BCF of helium pocket here and a BCF pocket over there. It’s challenging, because you have to find a market, or you have to sell to an industrial gas company. A lot of folks don’t understand the marketing side of helium.”
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While other commodities, like oil, or wheat, have open markets that anyone can follow, that’s not the case with helium. He said, “It’s tough. I think the prices will continue to rise. But we don’t know the price of helium right now, right? I mean, you wouldn’t be able to publish a price on your periodical, because there is no posted price. There’s an estimated price, but there is no market price for helium, anywhere. It used to be. The only price that ever existed was the Cliffside field, but that was for crude helium, not pure helium. But that remained the ‘sort of’ global benchmark price for helium in North America – then adjusted upwards depending on purity produced.”
Sears said MRI machines are pegged to helium supply, and it can’t grow unless they have a supply of helium. Rocketry is a growing market, with private enterprise taking over that industry. “They’re going to use a lot of helium,” he said.
However, he noted the last time there was a significant shortage of helium, a few years ago, there was “pretty significant demand destruction, because they couldn’t get helium.” As a result, substitutes were sought, where possible. However, he said, “for all intents and purposes, for most of its applications, there is no substitute for helium.”
The aforementioned U.S. strategic helium reserve, what is left of it, is being prepped for sale in September, 2022, he said. “It will be sold at auction to one buyer, a single buyer. That buyer would likely be Air Products – that’s my guess. And the only reason I guess that is because they’re the ones that bought most of that auctioned helium in previous sales, so they would have the most to lose.”
Prices and processing
Imperial Helium’s November 2021 corporate presentation said their “current conservative estimate for Grade A helium” is USD$375 per MCF or CAD$500 per MCF.” (Imperial is active in Alberta and British Columbia.)
Sears said, “I just don’t think that’s realistic.” He said. “If there was a severe shortage, spot loads could sell for that, but otherwise, you’re not going to get long term take-or-pay contracts at those prices – I mean, the buyers of that helium have to turn a profit too. Hauling ‘gaseous’ helium is expensive and it has to be ultra-pure to get anywhere near that price. ‘Liquid’ helium could fetch the low end of that price spectrum because you can haul a lot more liquid than you can gas and its already ultra pure in liquid form.
“Processing is tough. Helium is just an extremely complicated business.
“Helium E&P is like a three-legged stool: one leg is exploration, one is processing and the last leg is marketing. If you’re missing one of those things, the stool falls over.
“Anyone can drill a well, right? I’m no different. I’ve drilled lots and lots of wells, anybody can do that. Processing is an entirely different matter. And then marketing is a completely different matter from both of those.”
“There are a lot of new entrants in the helium exploration space right now and all of them know how to drill, he said. It’s the next steps which become somewhat problematic. For a few companies, some of the plants they are building are Serial No. 1, which oftentimes suffer lengthy growing pains getting the recoveries and purities just right. But everyone has to learn these things on their own – while hopefully maintaining investor interest.”
Government of Saskatchewan responds
Pipeline Online asked the Government of Saskatchewan to respond to Sears’ statement that Weil’s attempts at leasing additional helium land were rebuffed. Here is the Government’s statement, in full, provided by email on Dec. 22:
“Saskatchewan is at the forefront of a growing helium industry. We’re seeing a significant increase in investment in helium in Saskatchewan, by both Canadian and non-Canadian companies, which is demonstrated by the province issuing over 4.4 million hectares under active helium dispositions to companies with operations throughout North America. While we’re unable to speak directly to Mr Sear’s claim, because the application process is confidential, generally when applications are denied it is because they’re targeting lands that are already disposed or not available due to environmental or other regulatory restrictions.
“In fact, 2021 was a record year for helium permits and leases. We have launched a helium action plan, which includes a goal to supply 10 per cent of the world’s helium by 2030. To achieve this goal, the plan outlines policy and program commitments to support and grow the entire helium value chain and is focused on exploration, production, innovation, processing, and export infrastructure. We have also expanded the Saskatchewan Petroleum Innovation Incentive (SPII) to include helium projects and expanded the PST exemption for downhole oil and gas drilling services to include drilling for helium.
“Our Government has worked diligently over the past several years to create one of the most competitive business environments in North America with competitive taxes and incentives and a responsive government. We are proud of our reputation as a business-friendly jurisdiction that welcomes investment from around the world, including the U.S. This includes Cargill and Ceres Global Ag, who are planning new canola crushing plants, as well as international companies such as AMEC, BHP, Mosaic, Hutchison Whampoa, K+S Potash and Rio Tinto, to name a few. This is in addition to companies that have invested in our helium sector, including Weil Group, Canadian Helium, Royal Helium and North American Helium, who earlier this year opened the largest helium purification facility in Canada.
“Helium exploration and production are leading to more wells, more jobs, more facilities and, ultimately, more exports. We have high helium concentrations in the province and some of the most attractive geology in the world for low-emission helium production and we will continue working with industry to develop this important sector.”
***
The Saskatchewanderer visited the Mankota site in 2016, as seen here:
Pipeline Online aims to provide an average of two articles relevant to the Saskatchewan energy sector, Monday to Friday. Check us out regularly, or follow on LinkedIn for regular updates.
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<strong>This is Part 8 in a series regarding helium development in Saskatchewan.</strong>