NAH Is Leader Of Green Helium Pack

NAH’s helium lease holdings in southwest Saskatchewan.

Privately-owned North American Helium presently is the predominant producer of so-called green helium in the world and is widely seen as the company with the greatest growth potential — green helium is produced in conjunction with eco-friendly nitrogen rather than methane. To learn more about NAH’s past, present and future, including the competitive landscape for green helium, the Bulletin undertook an extended interview with Marlon McDougall, the company’s president and COO.

The genesis

“North American Helium was founded by Mr. Nicholas Snyder in 2013 as a long-term solution to the second global helium shortage, which had started in 2011,” says McDougall. “He recognized that the 1996 legislation [The Helium Privatization Act] that mandated the total sell-off of the U.S. government helium reserve was artificially depressing helium prices by forcing large amounts of low-priced helium into the market, while removing the one source of global storage that could be counted on in the future.”

“Our mandate has always been to find large reserves of helium in underground nitrogen fields,” he says. “Mr. Snyder recognized that helium produced from deep high-pressure nitrogen fields would have a much smaller environmental footprint and could be processed more economically than hydrocarbon-based deposits that contained helium.”

“And because helium is produced over hundreds of millions of years through the radioactive decay of uranium and thorium, it made sense to look where the highest-grade uranium mines in the world are, in Saskatchewan. The province had been one of the only places that had helium production from nitrogen fields in the 1960s, but this resource was largely overlooked in the ensuing decades.”

“Our goal when we created this company was to provide a stable and reliable helium supply to support science and technology in North America,” says McDougall. “A majority of our current customers reside in North America, but we also have long-term supply agreements with customers internationally, as we have realized that the geopolitical issues surrounding helium supply also create a risk for important industries in a number of other nations.”

The journey

“From the early days, our company recognized that the type of exploration effort that is needed only works on a large scale and requires a lot of time, money, and effort,” says McDougall. “We drilled our first successful well in 2016, but instead of focusing on one success, the company devoted the majority of its resources to acquiring land and seismic data across a larger resource base and advancing the science of helium exploration.”

Since 2013, NAH has invested over $200 million and devoted a significant amount of management focus towards exploration activities. In 2017, the company began to shift its focus from understanding the sourcing, migration, and trapping of helium to acquiring rights to highly prospective lands and structures and beginning a significant seismic and exploration and drilling program.

“Today, NAH is the most active driller of helium wells globally by a wide margin and the company holds almost 9 million acres of helium prospective acreage in Saskatchewan, which we believe to be the largest contiguous helium land position in the world,” says McDougall. “To our knowledge, we are the only company to have discovered new helium reserves in previously un-drilled structures and brought them onto production — something that we have shown we can do over and over again with this more environmentally friendly helium resource base.”

Although NAH presently can export helium around the world by having it liquefied at a third-party facility in the U.S., the company is seriously considering constructing a large-scale liquefaction plant in southwest Saskatchewan to improve the economics of its exports, according to McDougall. 

“We have a strong balance sheet and are more than willing to fund the liquefier on our own. Decisions around the optimal way to finance this facility are progressing in tandem with our engineering efforts, which should reach the FID stage before the end of this year. If others are willing to contribute capital, or sign-up for a long-term supply agreement, we are certainly willing to consider it, but we don’t need a partner to make this project a reality.”

The competition

“There are a number of smaller public helium exploration companies that have gotten headlines, but we don’t believe any of them are producing a significant amount of helium,” says McDougall. “We think the lack of discoveries is a major problem for a number of huge end-markets reliant on helium, so we welcome any additional exploration efforts [by other helium companies]. With that being said, we spend a lot of time internally looking at various projects and modelling future production and we do not see a significant contribution coming from any of the various potential helium plays that have been publicized.”

“What people need to understand is that this is ‘old school’ conventional exploration,” he says. “While the vast amount of existing seismic and well data available from past oil and gas exploration in places like Saskatchewan has provided us a big leg up, it is still an expensive process and you have to accept that you are going to drill some dry holes along the way. That takes time and capital but moves you up the learning curve.”

“We expect to drill more wells than the rest of the industry combined over the next twelve months and, of course, we have a significant first-move advantage in terms of our land position in Saskatchewan,” says McDougall. “It is very difficult to put together contiguous land packages in other jurisdictions. Even if this was possible, a land base the size of ours would likely cost more than $1 billion with only 3-5 year land tenure [compared to 21-year lease terms in Saskatchewan]. Our first-mover advantage combined with our large investment in exploration science over the last nine years has created a significant competitive moat for NAH.”

The future

“I think it is important to point out that we believe the current helium shortage, commonly dubbed “Helium Shortage 4.0” because it is the fourth shortage in a series that have occurred over the past 15 years, will not be resolved within the next few months or quarters as some market participants have speculated,” says McDougall (see Helium Shortage 4.0 Likely A Prolonged Affair).

“This situation has led to rapidly rising helium prices as industrial gas companies scramble to find supply for their customers. Our company has been built with a view that this situation would eventually come to pass, due to the lack of new helium discoveries. We are working hard today to increase production as quickly as possible and higher helium prices are certainly a tailwind for that effort.”

“We commenced first production in 2020 and now have three helium production facilities operating, including Canada’s largest helium purification facility, with plans for a total of eight facilities on production by the end of 2023,” says McDougall. “With these new facilities coming onstream we will exit this year producing at a rate of approximately 110 mmcf/year, which is double 2021, and we expect that to double again by the end of 2023.”

“We don’t have a forecast for 2030 that we are sharing publicly yet, so I can’t provide you with a specific number or range per se, but the way we think about it is we expect to be the largest contributor to the Saskatchewan Helium Action Plan’s target of producing 10 per cent of the world’s helium,” he says (see Saskatchewan To Become A Major Helium Power).

“Clearly southwest Saskatchewan is our core position and with a scale that allows us to create a new helium hub in North America — a new source of reliable supply that is urgently needed to replace the diminishing sales from the depleting U.S. helium stockpile.”

“But our team has been searching across the U.S. and Canada for prospective resources of helium in underground nitrogen fields since inception, and over time we have acquired several smaller-scale acreage positions with a view towards development,” McDougall says. “There is nothing that rivals the scale and potential of what we have in Saskatchewan, but with helium prices rising we are devoting resources to advance a few targeted prospects in Utah and Arizona. Our expectation is that we will drill our first non-Saskatchewan location in Utah in 2023.”

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