Brian Zinchuk is editor and owner of Pipeline Online
Royal Helium drilled two wells at Ogema last fall, seen above. Now they are starting to drill at Val Marie. Photo by Brian Zinchuk
SASKATOON – Royal Helium started drilling for helium near Climax, Saskatchewan, in January, 2021. So far, they have punched four holes there, and two northwest of Ogema, with Val Marie next on the agenda. But once they found helium, the key thing was figuring out how to maximize its extraction.
To do that, the company turned to the University of Regina’s petroleum engineering department, and specifically to Dr. Gary Zhao, P.Eng, to model drilling scenarios for the Nazare reservoir. On July 5, Royal announced their results.
The ”Nazare zone” is what Royal Helium dubbed what they discovered below the conventional helium production zones they hit in the first three successful Climax wells in southwestern Saskatchewan. The Nazare zone, although theorised had not been encountered or mapped before. Testing confirms that it is charged with helium over significantly wider intervals than any reservoir in Saskatchewan history.
Pipeline Online spoke to Royal’s president and CEO Andrew Davidson on July 7. He said, “The takeaway is that the Nazare zone, with initially unknown production capabilities, can now be seen as overwhelmingly productive. Extremely high flow rates of helium gas coming from horizontal wells. As far as we can tell, they will be the first horizontal wells drilled for helium as the primary product anywhere in the world. Just a terrific result, frankly.”
“The Nazare zone presented initially with some technical challenges. We needed some expertise in tight gas plays to ensure that we were developing this field in the proper way,” he said. “We could have drilled these all as verticals. This would have been less productive and longer payouts. So we kicked it over to the U of R’s Petroleum Engineering college and said, ‘Look, you guys are tight gas experts. Tell us what to do here.’
“The whole point was to find the way to produce the most gas and the fewest wellbores. So that’s what they’ve done.”
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Over 600 simulations were run with multiple variables, using the data from Royal’s DST and DFIT operations in the Climax-4 well. Royal is currently evaluating several of the viable production well models presented and will select the ultimate design(s) that will have the largest deliverability with the quickest payback period. Given the large areal extent of 30+ sections (30+ square miles) of Nazare, multiple wells will be considered. Royal anticipates well design finalization and drilling of the first Nazare well in late 2022.
They tested concepts running up to 12 horizontal legs in a well. With the Nazare formation being 100+ metres thick, multiple legs could be done at multiple depths. Davidson said they are likely going to start with two legs, each with a mile-long horizontal lateral.
Independent Well Servicing worked on Royal Helium’s Climax-4 well, which was test-fracked
Each leg will have 32 frac stages. Late last year they did a test frac over the interval that was DST’d earlier and came back with the same helium cut over the whole 100 metre interval with improved permeability. And from that modelling, Royal has high hopes. “Frankly 17 million cubic feet a day is an enormous flow rate. So once we drill that and confirm that, it’s going to be a function of drilling a couple more, and at the same time, building a permanent helium processing facility at Climax.”
That 17 million cubic feet per day is a six-month average flow rate expected on a dual-leg horizontal well using the actual data from the test frac.
It turns out the Nazare formation is also methane (natural gas) bearing. It’s not 99 per cent methane typically seen in natural gas wells, but 20 to 25 per cent, with the remainder of the bulk being nitrogen, and 0.65 per cent helium. That means that, along the way, Royal Helium is likely to become a natural gas producer, because they may have to do something with that gas, given the federal push to curtail venting and flaring.
“You can’t just flare it, and capturing it and putting it back down doesn’t make a whole lot of sense, so find a way to use it. That’s what we’re going to do,” Davidson said.
It changes the Saskatchewan narrative somewhat, in that helium production in this province has been termed “green helium.” Green helium is generally specifically targeted, and done without the production of hydrocarbons. That’s substantially different from most helium production in the world, where helium is extracted as a by-product of oil and gas production.
As for the wells already drilled at Climax, he anticipates helium production from stratigraphically higher-up in the Duperow, Souris River and Deadwood formations. “This Nazare was an accidental find, below everything else,” he said.
Val Marie
Royal will start drilling its first well at Val Marie in the next few days. “That lease is going to get built tomorrow or the next day, and spudded on or around the 10th, so that’s important,” he said.
The Val Marie property is one of the first Royal pursued in the early days of the company, and now it’s time to develop it.
Royal Helium president and CEO Andrew Davidson. Photo by Brian Zinchuk
“We’re basically, the first time, drilling the Bowdoin Dome in Saskatchewan. It has already been drilled in Montana where there’s current helium production from the US side of the dome,” Davidson said.
“Val Marie is one of the crown jewels that we kept in our back pocket, but now it’s time to go drill it. We completed a seismic shoot at Val Marie during breakup this spring, which provided us with the definitive targets that we needed.”
Imperial Helium acquisition
Royal is in the final days of closing its announced acquisition of Imperial Helium, an Alberta helium explorer. Imperial’s shareholders vote on the deal next Tuesday (July 12), and if they approve the transaction, then it is expected to close July 22.
Imperial has two production-ready helium wells which Royal would like to bring into production soon, to take advantage of the helium price spike and the “ongoing, significant helium shortage globally.”
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“We targeted Imperial to increase our initial flow rates, which allows us to contract more volumes of these current high prices. That’s what we’ve been able to do,” Davidson said.
“They have a small track of land about 60,000 acres, so it’s not a huge asset base, but the wells are very productive. Combined 13 to 15 million cubic feet of raw gas. So, lower helium grades of 0.5 per cent, but high flow rates. It basically just let us in accelerated our path to material cash flow.”
They intend on setting up “mobile separation unit” for purification, essentially a big skid package.
Davidson said, “We are in the process of securing processing equipment for both Steveville in Alberta and the Climax conventional gas at the same time, which is a lower flow rate, higher helium percentage gas. They’ve been designed, RFQs are out and we’re waiting on for vendor selection now.”
And that’s where the whole supply chain issue comes into play. Royal had hoped to be further along, but getting the necessary hardware is taking a lot longer than expected.
“It’s unfortunate, but supply chain issues are effecting everyone right now, regardless of industry. The lead times are challenging.”
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“Of course, when we announce our first offtake agreement securing a locked-in pricing structure at today’s unusually high price combined with plant capacity specifics will introduce valuation metric clarity ahead of actual production.”
Ogema and mineral rights
Last fall Royal drilled two wells northwest of Ogema. They reported the highest helium percentages in any of their wells, but have not been able to complete testing over one of the primary zones of interest.
“We tested the Deadwood, and there was high helium there, but the biggest spike we had while we were drilling was the Red River,” he said. “We don’t want to do anything on it until we’ve properly tested that zone, so we mothballed it until there is clarity over segregating the helium rights in that zone.”
The situation highlights a growing issue in Saskatchewan with the development of all these new industries. When there could be oil, gas, helium, lithium and even geothermal at play, who trumps who?
Pipeline Online asked Premier Scott Moe about this very topic in December, and you can see his response below.
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