Royal Helium’s Ogema-2 well drilled last fall, north of Ogema. Photo by Brian Zinchuk

SASKATOON – In on Feb. 22, the United State Geological Survey (USGS) revised its critical minerals list. In doing so, they added nickel and zinc, but removed helium, potash, rhenium and strontium.

The revision to the list took place two days before Russia invaded Ukraine, eliciting several rounds of economic sanctions imposed by governments, plus individual firms like BP, Shell, Halliburton, Schlumberger and Baker Hughes pulling out of Russian operations in the following weeks. Russia is a significant producer of helium and potash.

Asked about his thoughts on the USGS move, Royal Helium president and CEO Andrew Davidson said on March 3, “It’s confusing, and I’m thinking right about now they’re wishing they didn’t do that, given the implications of what’s happening with Russia and the Ukraine.”

He noted the word was out at a Houston conference in December that helium was coming off the critical minerals list. Davidson said, “There’s no there’s no real rationale that anyone can find for why it’s being removed. It remains on the Canadian critical minerals list.”

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“It’s removal has no impact on price. The price is governed by supply and demand, like anything else” he said.

Indeed, it’ll make it easier to sell helium out of the U.S. into certain markets, he noted. “It could eliminate a lot of potential roadblocks. On the Canadian side, it has no impact at all. For our operations, we’re more than likely going to be selling gas into a liquefaction facility anyway. So, our sales point will be at our wellhead or at our liquefaction plant.”

“It’s an important point, Russia being one of the top three producing exporters. An expansion at their Amur gas facility was delated through another fire at that site. But these additional sanctions coming on are going to be a big problem in the helium industry. So, losing Russia as a trading partner will lose a large percentage of the total supply,” Davidson said.

Does that motivate Royal to move quicker?

“Absolutely,” Davidson replied. “More than ever. Russia’s not a large consumer of helium. They are a large producer. So there’s really no impact whatsoever to losing Russia as a customer, but a huge impact as a producer.

“It opens the doors significantly for players like us and for North American and anyone else who’s been drilling and getting ready to produce into long-term contracts. Yes, the heat is on to try to replace that supply. Once you replace it with a steady stream of supply, there’s very little reason to move back to Russia as a preferred supplier.”

He thinks it’ll be a number of years before that changes. But the world market has a very short memory when it comes to sourcing supply of critical materials.

 

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