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Russia Set to Top Helium Supply as U.S. Sells Reserve

Russia, already the largest producer of crude oil and natural gas, is weighing up plans to become the biggest supplier of helium, the inert gas vital for medical scanners, welding tools and rocket fuel, as the U.S. sells reserves from storage.

Russia’s remote, undeveloped gas fields in eastern Siberia are helium rich and could hold a third of the world’s remaining resources, said Vadim Udut, head of OAO Geliymash, a Moscow- based helium research company that advises gas-export monopoly OAO Gazprom. The country may build storage caverns, he said.

While helium is the universe’s most abundant element after hydrogen, supply on earth is limited to natural gas reservoirs. The U.S., the largest supplier today, is selling a federal stockpile maintained during the Cold War. Global demand may rise 2 to 3 percent a year over the next five years, said Maura Garvey, director of market research at CryoGas International.

“Russia may take the place of the U.S.,” said Andrei Korzhubayev, a professor at the Russian Academy of Natural Sciences who helped draft the country’s energy strategy to 2030. “Eastern Siberia can open the entry to that market.”

Today, Russia lags behind the U.S., Algeria and Qatar, where Exxon Mobil Corp. and industrial gas producers Linde Group and Praxair Inc. have invested in capacity. Qatar will open the world’s biggest production plant in 2013.

Global Demand

Russia may be able to catch up because its gas reserves hold a higher proportion of helium and the fields are close to Asian markets, where Garvey said demand is growing faster.

Global demand may rise to about 300 million cubic meters (10.6 billion cubic feet) a year in 2030 from 175 million cubic meters now, Geliymash’s Udut said. Magnetic resonance imaging scanners used in hospitals are the biggest consumer of the gas. Russia may meet as much as half of the future demand, Udut said.

“The U.S. is a significant piece of the global supply and we don’t really know what the government plans to do with the Bureau of Land Management reserve after 2015,” Garvey said in a phone interview, referring to the strategic stockpile. “What will replace the BLM supply if it goes away?”

The U.S. Bureau of Land Management raised the price for open market crude helium by almost 16 percent to $75 a thousand cubic feet for this year, after a review of how the policy affected U.S. interests and the global market.

‘Trump Card’

President Dmitry Medvedev’s drive to transform Russia, dependent on energy exports, into a knowledge-based economy may expand the domestic market for helium. Medvedev has won commitments from international partners such as Cisco Systems and Nokia Oyj in his push to build the Skolkovo technology hub outside Moscow.

“The component may encourage the development of high technology,” Udut said. “It may become a political trump card to improve relations with countries that aren’t rich in the element.”

Gazprom will have to make a plan for helium before starting natural-gas output at the eastern Chayanda deposit in 2016. The development plan, which Gazprom is preparing in the first half of the year, will lay out sites for a processing facility and how to extract, transport, store and sell helium.

OAO Rosneft, Russia’s biggest oil company, and other gas producers in the country, are also drafting plans on how to utilize helium as they tap eastern Siberian deposits, Udut said.

Kazakh Border

Russia’s only helium facility, in Orenburg close to the Kazakh border, processes less than half the helium extracted at nearby fields, releasing the rest into the atmosphere, he said. Some volumes are exported.

“The scale of the eastern Siberian program makes such practice senseless,” Korzhubayev said. “We need a government decision, a ban on release of helium, and international experience.”

Gazprom sent a container with 40 cubic meters of liquid helium from Orenburg to South Korea last month, Russia’s first delivery to Asia, according to the gas exporter’s website.

Qatar will be the world’s second-largest helium supplier after opening a second production facility in 2013, according to QatarGas. The Qatar Helium 2 Project plans sales of 1.3 billion cubic feet a year, almost double the first plant’s capacity. The Qatari volumes will help replace withdrawal volumes from U.S. storage, which Garvey said in a report are operationally capped at 2.1 billion cubic feet a year.

“There is a lot of competition to be the one first with the gas at the right time and attracting that market demand,” Garvey said. The key to developments is what the U.S. does to secure future global supply after selling reserves by 2015. Russian capacity won’t be needed until at least then, she said.

To make extraction profitable in Russia, the government must invest in storage capacity and guarantee helium purchases, Korzhubayev said. The amount of helium Gazprom could produce in eastern Siberia is more than the market can now absorb, Gazprom Deputy Chief Executive Officer Valery Golubev said.

“There are no other deposits like these,” Golubev said in November. “That is why it is important to keep this helium.”

To contact the reporter on this story: Anna Shiryaevskaya in Moscow at ashiryaevska@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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