By Collin Gallant on September 8, 2017.
Well, it’s not a gusher, but officials with the City of Medicine Hat’s petroleum division certainly think it could be, and soon.
A plan to drill, extract and possibly refine helium in the region was spelled out at Thursday’s city utility committee meeting, citing drilling this month and a promise of a 12- to 24-month plan to monetize any find.
“We feel comfortable that we have the people and the skills,” said NPGR general manager Brad Maynes. “We’ll still be the Gas City—it’s just not going to burn.”
He titled his presentation — which will be given to council’s Sept. 18 meeting — as Helium 101. It was billed as a tutorial into a commodity most think of as perhaps whimsical, but is 100 times more valuable than natural gas and is used in a variety of industrial processes.
The issue was sprung upon the population this week in a News article that reported quantities of the elusive element were present in ongoing oil drilling.
None has actually been found yet, but helium-specific drilling will begin this month on leases quietly secured over the past year in southwest Saskatchewan.
The gas comes from deep underground and becomes trapped in pockets that can form beneath conventional oil pools.
The city’s existing exploration program will now pick promising targets, seek out oil, then go about 500 metres deeper in search of helium, said Maynes.
The conventional wells, estimated to cost up to $1.5 million each, will be paid for out of an existing three-year $45-million budget to boost oil production. Any new spending request would go before council.
Committee chair Coun. Bill Cocks said the exploration and initial handling is similar to natural gas, though it’s much harder to gather and logistics are more complicated in later stages.
He said it could become a lucrative offshoot of the city’s energy portfolio if market conditions persist.
“I think it will catch people by surprise that it is as valuable a commodity as it is,” said Cocks, who admitted he was surprised when the plan was outlined to council in 2016.
“We’re in a position to anticipate some marketable quantities. If it’s there, we’ll find money, or find someone to partner with … That’s the nature of the oil and gas business.”
That city is in the midst of a program, known as the organic growth strategy, that seeks to reduce the city’s dependence on low-priced natural gas.
It was a key reason why Maynes was hired in 2015 with a strategy to divest low-production wells, remove future liability, and find more light oil to boost revenue.
The third leg of the strategy, only revealed this week, is helium, demand for which in high-tech manufacturing is set to outstrip production in North America.
It began last year when the city bought a huge amount of seismic data, and the division has studied the data since.
Maynes, who specialized in the region as a private sector geologist, says “untapped potential” is in the area known mostly for shallow natural gas — usually referring to light oil, such as the Glauc C in Medicine Hat.
That now also includes helium, which has been produced in small quantities near Swift Current since the 1960s.
“That potential that’s in southwest Saskatchewan should extend to southeast Alberta as well,” he said.
The royalty regime for extracting helium is much lower in Saskatchewan, although an Alberta lease has been secured, according to documents, and the city is lobbying the province on rate changes.
With the nearest major helium refinery in Kansas, and a spike in interest from exploration companies looking for helium in the Western Canadian Basin, officials feel that eventually a refinery here could service the entire Prairies.
Also, the city’s position as a mid-sized petroleum company, if a substantial supply is found, could give advantage over smaller companies in the sector.
“(A refinery) is long term,” said Maynes. “But it’s something we’ve thought about as our end game.”
Only a handful of major chemical companies market the entire global supply from about 20 helium refineries around the world.
Half the world’s supply is stripped out of Qatar’s massive natural gas production. Another 30 per cent comes from the United States, which has dwindling production and little new investment.