Helium Shortage: More Than Just Hot Air
Helium is a source of energy that’s often overlooked – but its shortage could be devastating.
Helium has become an essential element in many sectors of our technology economy. It’s used in medical equipment like MRIs and lasers, and the inert gas is used in electronics manufacturing, and also has aeronautics applications.
Unknown to most energy investors, there’s actually a helium shortage that’s been developing over the past several years. Thanks to booming demand, especially in Asia, there are fears that the world may run out of the gas within 25 years.
With an economy that relies (increasingly) on the fuels of technology to burgeon our future, this shortage is a big deal.
United States Scrambles to Avoid Tragedy
The key supplier of underground helium in the world is the United States. The United Sates supplies about 70% of the total helium that’s consumed worldwide.
And 30% of those American supplies come from the government-owned Federal Helium Reserve. But the reserves there are falling at an accelerating rate. Not to mention an already-falling helium recovery with natural gas reserves. Couple those… and voila – there’s a shortage.
That indicates rising prices for helium, which happens to be good news – at least for the industrial gases companies involved in helium production like Praxair (PX), Airgas (ARG) and L’Air Liquide SA ADR (AIQUY).
The main beneficiary of these price hikes, however, will be the world’s largest producer and supplier of liquid and gaseous helium – American-owned Air Products & Chemicals (APD).
How to Play the Loss
Sure, reserves are down – but there is, of course, a way to play the loss.
And it’s with APD, which is about to explode even bigger in the sector.
Thanks to its new helium project in Doe Canyon, Colorado, APD will uncover the first new source of helium announced in the past three years.
The company will separate helium from naturally occurring, underground carbon dioxide currently being extracted by energy company Kinder Morgan (KMI). The carbon dioxide will then be piped to the Permian Basin in West Texas for use in enhanced oil recovery.
The Colorado plant will produce up to 230 million cubic feet (mcf) of helium when it begins production in the spring of 2015. This is equivalent to 15% of the current annual output from the Federal Helium Reserve.
Once online, this facility will be the only one in the world that’s extracting helium from a carbon dioxide gas stream, thanks to the company’s proprietary technology.
In addition, APD is involved in another project at the Riley Ridge gas field in Wyoming with Denbury Resources (DNR). Riley Ridge is one of the largest helium-rich natural gas fields in the United States and is believed to contain enough helium reserves to support production for decades.
These new projects will allow Air Products & Chemicals to provide its investors with profits that are far more than hot air. In fact, as the leader in the worldwide helium industry, APD may single handedly deflect a devastating helium shortage.
And “the chase” continues,