Helium One Global (LON: HE1) is prospecting for high-grade helium (“He” in chemistry) in Tanzania. This could work and as with any other prospecting for a mineral resource operation, might not. The important thing to understand is that the competition is with Liquefied Natural Gas. Sounds odd but it is actually true.
We hear much about how helium is rare, that we must have it too. Both are true, we can’t have supercooled things in medical treatment without it, airships would be very dangerous with hydrogen gas envelopes and so on. It’s also true that after many uses the helium is simply released to the atmosphere where it boils off into space and is lost – there’s very little recycling at present.
It’s even true that the long-term supply controlled by the US Federals, the wells in Texas, are becoming exhausted. So, Helium One would appear to be onto a winner. Except it’s not all as slam dunk as that.
Helium is the only element we use industrially that is being continually generated on the planet. The Earth’s original complement, endowment, of helium boiled off into space billions of years ago – He is very light after all. All that exists now, the underground supplies, the 3 parts per million in the atmosphere, all this has been newly and recently created. The helium is a daughter product of the radioactive breakdown of thorium and uranium in the Earth’s crust. The same process that sticks that radon in cellars in Cornwall.
This helium tends to collect, when it does collect, in the same reservoirs as natural gas. That resource in Texas was just a deposit very rich in helium. Helium One’s prospect in Tanzania is another such rich resource, so all the indications are. This is logical, granites tend to be heavy in uranium and thorium, the area is – and so on.
So, the world needs and desires more helium, there’s a helium rich gas deposit, Helium One is prospecting that helium rich gas deposit. Which is where the actual competition comes in.
Near all-natural gas contains some helium. Might only be a little bit, might be quite rich. The way to extract is to distill the natural gas. If we take the gas and cool it then the butane (or maybe the propane) liquefies first and we can draw that off, leaving the other components still as gas. Go down another level of temperature and we get liquid propane (or butane) and there is gas still remaining. Keep going and whatever oxygen there is liquefies, can be drawn off, then nitrogen and eventually we get to the helium.
This is expensive to do and is only worth it, from a standing start, if the helium concentration in the original gas is high.
But now think what liquefied natural gas is. We take our natural gas, which has a little bit of helium in it, then cool it to get the propane and butane, etc as liquids. Leaving us with a helium rich atmosphere left over. Which is much cheaper to produce pure helium from. And what’s the world doing? Moving over to producing and using vast amounts of LNG. Which is why Qatar, one of the leading LNG producers, is also the new entrant into the helium market.
It’s entirely possible that Helium One will succeed. The thing investors need to know is that the competition for Helium One is not some other deposit of helium rich gas out there. It’s the entire global LNG industry that is the competition. Whether speculating in Helium One stock or investing in Helium One shares, that’s the one grand fact to grasp. They’ve got to be better – or the deposit richer – than LNG.
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Tim Worstall is a freelance writer specialising in economics and the financial markets.