By Collin Gallant on September 6, 2017.
Medicine Hat’s foray into oil exploration has netted a bonanza of gas, but not the kind you may think.
Sources first told the News earlier this year that ongoing drilling at a city play in west-central Saskatchewan was resulting in high levels of helium.
The naturally occurring element that forms deep underground is in high demand for medical and industrial uses.
Due to volatile world markets, the price of helium is about 40 to 50 times that of natural gas.
City administrators are now prepared at a committee meeting Thursday to discuss the find, and its plan to exploit, refine and market the substance.
A meeting in April laid out the find to provincial officials as well as some interest groups in Medicine Hat.
Elected officials have been reluctant to discuss the implications on the record because staff were still evaluating the geology and economics of the find.
“It could be bigger than natural gas,” said one person close to the situation last December. “It could be another golden goose.”
If so, that would be welcome news for the city, which for eight years has weathered low natural gas prices, and this year enacted spending cuts and tax hikes to address huge budget shortfalls.
The city will use more than $15 million in reserve funds this year to cover a budget gap that was previously filled with profits from its petroleum and power generating businesses.
That effort, to remove energy profits from operating budgets, could be complete by 2026, while new resource dividends are to be funnelled into a new reserve fund that could fund capital construction.
Since 2016, the city’s energy division has sought out new oil plays in a multi-million dollar drilling program known as the organic growth strategy.
There’s no indication about the size of the find or other petroleum reserves. The price of crude helium averaged $104 per 1,000 cubic feet in 2016. Grade A helium topped $200.
That sort of pricing has caused a surge of interest in gas leases in Saskatchewan.
Beyond a boost to city revenue, city staff will aggressively seek to locate a major helium refinery in Medicine Hat, according to background sent to the city’s utility committee, which oversees the natural gas and petroleum resources unit.
“It is NPGR’s goal to solidify the city as a significant participant in this exciting new industrial activity, which will encourage jobs and also diversifies the (city’s) production stream,” reads a briefing by staff.
Logistically, helium cannot be shipped via pipeline and must be concentrated on site, then trucked.
The fields in question, referred to as “Primate” and “Denzil,” are located near towns of the same names in western Saskatchewan, across the provincial boundary from Provost, Alta.
The city has obtained a helium production lease from the government of Saskatchewan and is applying for more leases. It plans to drill five more wells next year. Existing cash in reserves would pay for the endeavour.
The United States several years ago signalled it will sell off its strategic supply, leading to market uncertainty. That country accounts for more than half the global supply, with Qatar producing about a third, though country is also currently the subject of sanctions. There have been large discoveries in Africa.
Helium is a critical component in operating MRI medical diagnostic equipment and other laboratory processes, as well as welding, fibre optic cable and cryogenics.
Small concentrating plants are situated in Mankato and near Swift Current. City staff states it is likely Western Canada could only support one major refinery.
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