Hiding in Plain Sight?

Hiding in Plain Sight?

What do the European Organization of Nuclear Research (CERN), the PGA Tour, deep sea divers, partiers, and ravers have in common?

Atomic No. 2 — aka Helium.

CERN uses helium to cool the super magnets keeping all those subatomic particles moving in the right direction at the Large Hadron Collider.

Golf aficionados have always appreciated the incredible resolution of cameras at 1,000 feet, peering down on the greens and fairways during iconic tournaments, which is made possible by element No. 2.

Divers have helium in their breathing mix to lessen the risk of the bends and oxygen toxicity.

Finally, we all get a great laugh at a party when a friend’s deep voice is turned into a Mickey Mouse squeak after inhaling helium.

Helium was added to both the U.S. and European Union critical minerals lists in 2018. Since the U.S. Bureau of Land Management (BLM) is required by the Helium Stewardship Act to quit operating the Federal Helium system in 2021, the private markets and international players have begun to step up and fill the void.

To understand where the industry sees itself, I recommend reading this gasworld article about the Global Helium Summit 2018: https://www.gasworld.com/global-helium-summit-2018-closes/2015512.article.

Helium becomes more than just an esoteric curiosity when its economics are considered. The graph below shows the tightening of helium supply in the U.S.

https://en.wikipedia.org/wiki/Helium_production_in_the_United_States#/media/File:US_Helium_Production_and_Storage_1940-2014.png

Reflecting the supply squeeze, prices at the most recent BLM auction (Aug. 31, 2018) ranged from $233/mcf to $337/mcf — roughly 78 to 100 times the price of quality natural gas.

Where can we find it?

The United States Geological Survey (USGS) has a database on helium concentrations reported in a sample of wells (

https://energy.usgs.gov/EnvironmentalAspects/EnvironmentalAspectsofEnergyProductionandUse/GeologicCO2Utilization/HeliumConcentrationsinUnitedStatesWells.aspx).

 

Here’s the location of wells reporting mol% concentrations of 2% or more (note that not all wells with measurable helium are in the USGS database):

The following graph shows mol% concentration as a function of reservoir name.

The top three by count in this sample are: Arbuckle (38), Keys/Keyes (141), and Morrow (38).

Other sources cite high concentrations in the Coconino Sandstone (Arizona), McKracken Sandstone (Arizona), and Lyons Sandstone (Colorado).

The USGS data may have guided Desert Mountain Energy in their recently announced transaction (Jan. 15, 2019) to buy 884 acres from Seminole Production Partners in Seminole County, Oklahoma, to pursue the helium potential from the underlying Gilcrease reservoir (https://www.gasworld.com/desert-mountain-energy-acquires-oklahoma-project/2016315.article).

If you roll areas of known helium production — LaBarge, Riley Ridge, and Cliffside Field storage — into the previous maps of high helium concentration, it’s clear there are several basins and provinces that could be considered helium “rich” in the lower 48.

Per John Gluyas’ great article in the February 2019 issue of AAPG Explorer, the minimal exploration constraints for concentrations of helium are:

  1. Old granitic basement to source He4 (the usable isotope)
  2. Recent compression heating and compression of the “source” rock to release the helium
  3. Transport of helium with natural gas, usually nitrogen
  4. Migration into a “trap”
  5. Degassing at shallow depths or entrapment in natural gas reservoirs

How aware are operators, especially in horizontal unconventional resource plays, of the helium concentrations (read=value) in their natural gas stream?

Is helium production explicitly covered in modern mineral lease agreements?

Is there enough helium going into the gathering systems of major unconventional plays to consider building the infrastructure to extract helium to supply a tightening market?

Has helium bypassed the unconventional reservoirs and migrated uphole to shallower, less pressured reservoirs?

As always, I’d love to hear if you or your company is actively accounting for potential helium-derived additions to your bottom line.

Please send your thoughts to me at mnibbelink@drillinginfo.com.

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