By Rod Nickel
WINNIPEG, Manitoba, Jan 18 (Reuters) — Canada’s farm and mining province Saskatchewan is seeing record activity in exploration for helium, as global demand rises like a hot air balloon for the gas used to manufacture semiconductors and conduct medical tests.
Saskatchewan produces only 1% of the world’s helium, dwarfed by Qatar and the United States.The provincial government hopes to lift output to 10% of world supply by 2030, and last year unveiled new incentives and credits.
Producers have made a promising start. Saskatchewan issued 126 permits and 72 leases for helium production in 2021, breaking previous records, according to government data obtained by Reuters.
The gas is generating strong demand for manufacturing semiconductors, a critical material for computer chips that has been in short supply during the pandemic.
Global demand looks to outstrip supply until at least 2025, keeping prices high, said Phil Skolnick, an analyst at Eight Capital. Canada has the world’s fifth-biggest helium resources and is strategically located next to the United States, the world’s biggest helium consumer.
The industry has long eyed Saskatchewan’s potential but global competition from producers such as Russia’s state-owned Gazprom and U.S. oil major Exxon Mobil Corp made it difficult to develop.
Royal Helium Ltd is one of several small companies that hope to take advantage of Saskatchewan’s incentives.Its helium discovery near Climax, Saskatchewan last May was one of the province’s largest known helium discoveries and could support up to 50 wells, double the 24 helium wells currently being drilled in Saskatchewan by all companies combined.
«Finding this new helium fairway in Saskatchewan and having the support of the provincial government to the extent that we do, is making this all possible,» CEO Andrew Davidson said, adding that Royal aims to start production from 10 wells by year-end.
Three firms — North American Helium, Canadian Helium and Weil Group — produce a combined 60 million cubic feet per year in Saskatchewan. North American Helium opened a C$30-million purification plant last spring to supply Air Liquide, which is one of the world’s biggest helium purchasers.
Saskatchewan’s ambition remains a «stretch goal,» considering there are large helium projects under development in Russia and Qatar, said Phil Kornbluth, a U.S.-based helium analyst.
«While there continues to be a bullish opportunity for companies who successfully discover large reserves of helium, and are able to raise significant capital, there has been a fair amount of exaggeration and hype generated by some of the more promotional start-ups,» Kornbluth said.
Saskatchewan, which also produces oil, potash and uranium, has one of the most highly concentrated helium resources in the world.That means it can support drilling for helium itself, rather than capturing it as a byproduct of natural gas production, which accounts for most global helium production, Skolnick said.
That also means Saskatchewan can produce helium without generating most of the methane emissions associated with extracting natural gas, Davidson said.
Energy Minister Bronwyn Eyre said once Saskatchewan’s production grows, it hopes to build a liquefaction plant to convert the gas into liquid, enabling transport over longer distances.
Some producers have already expressed interest, and Saskatchewan has financial incentives available, Eyre said.
Neighboring Alberta is also rich in helium and Fornecedor de Brindes well-positioned to meet rising demand after establishing a competitive royalty rate for production in 2020, said Jennifer Henshaw, spokesperson for Alberta’s energy minister.(Reporting by Rod Nickel in Winnipeg; Editing by David Gregorio)