Small companies scramble to round up Canadian Prairie helium rights

Gary Park

for Petroleum News

A scramble is underway among a host of small Canadian companies to turn an essential ingredient of kids’ birthday parties into a treasure trove.

The rush for now is concentrated on rounding up land rights on the Canadian Prairies to create jobs and generate wealth from helium that until now has been best-known for filling party balloons with the odorless, lighter-than-air gas and over the past year has emerged as a vital element for respiratory treatment of COVID-19 patients.

Aside from saving lives, helium could be a rescue line for a struggling natural gas industry, spurred on by a modest royalty rate of 4.25% that has been set by both the governments of Alberta and Saskatchewan.

The added incentive has been a surge in commercial helium prices to C$200-C$600 per thousand cubic feet, compared with the C$3 for conventional natural gas.

Significant resources

Alberta Energy Minister Sonya Savage said removing the royalty rate barrier “unlocks the potential to develop helium deposits in Alberta and sets us up to take advantage of our close proximity to the United States.”

“Economic diversification is an essential part of our province’s recovery efforts and puts us on a course toward future prosperity,” she said.

The Alberta government has yet to disclose how much it has earned in helium revenues. That could indicate it is unwilling to show how far it lags behind Saskatchewan, which already has nine active helium wells and another 24 being drilled.

Saskatchewan is also home to Canada’s largest helium purification facility that was built at a cost of C$32 million and is owned and operated by Calgary-based North American Helium.

The privately held company hopes to produce more than 50 million cubic feet per year of helium for commercial sale from the more than 20 wells it has drilled in southwestern Saskatchewan.

North American raised C$39 million for the construction of a second purification plant in the area, with design capacity of 160,000 cubic feet per day of purified helium.

The company now claims to have acquired rights to explore for and produce helium on an expanding property base of 4.4 million acres in Saskatchewan, Utah and Arizona.

To sweeten its incentives, the Saskatchewan government has offered a 15% transferable royalty credit for processing and liquefaction projects.

Alberta joins the race

Since 2016 only two existing oil and gas wells in Alberta have been converted to helium producers, according to the Alberta Energy Regulator, with one of the wells taking two years to yield significant amounts of the commodity, starting in April 2020.

Chris Baker is chief executive officer of Calgary-based Avanti Energy, which recently leased 7,000 acres in southern Alberta to explore for helium and is hoping to secure access to 12,000 acres in Montana.

He said that over the last 18 months “quite a few companies have appeared on the market.”

Andrew Davidson is chief executive officer of Royal Helium which raised C$7.5 million last year and has just finished drilling three wells in Saskatchewan, which it hopes will become a Canadian core for helium production.

He said the company has demonstrated that “anything you understand about the oil and gas sector is exactly the same in the helium sector - there is no difference in how you drill the wells.”

Virginia-based Well Group is producing small volumes in the two provinces and operates a purification plant in Saskatchewan, where it reactivated old wells drilled in the 1960s and reactivated them to produce helium.

The North American helium market has been bolstered in recent years in response to a 2013 law requiring the U.S. government to complete the sale by September of its strategic helium reserve, which was established in Texas in the 1920s.

The drain on the reserve has turned the U.S. into a net importer of helium.

- GARY PARK