Helium 2012: event report
The Russian gas giant is implementing a large-scale performance improvement program and starting to treat helium as a full-value business. Accelerated implementation of Eastern Gas Program and opportunities for helium export are turning into reality. The Government should support Gazprom in this endeavor.
On Tuesday October 23rd, the International «Helium 2012» Conference, organized by Creon Energy, took place at Hotel Baltschug Kempinski Moscow. The event was held with the support of its Gold Sponsors, Gazprom Gazenergoset and NII KM. Energokaskad Company was the Partner of the Conference; Russian Gas Society supported the event. In his welcome address, Chairman of Creon Energy Dr. Fares Kilzie admitted how unique and important helium is. Production and transportation of the product is a challenge. However, none of the other gases can match helium in its properties. Development of high-technology industries is impossible without this element. Currently, the main global helium producer is the USA with 22 out of 29 plants globally. Russia in its turn begins to develop projects in the Far East. Construction of LNG plant with capacity of no less than 10 million tons per year in the region of Vladivostok is expected. Development of Chayanda and Kovykta gas fields could radically change the international helium market.
Lola Ogrel, Deputy CEO of Infomine Research Group, presented an overview of Russian helium market. Global production volume of helium in the past three years amounted to 107-120 million cubic meters annually (not including helium intake from underground storages). USA have dominating positions in the market, producing 70-73 % of the total volume. Russia had a share of 3% in 2011. Air Products, Praxair, Linde and Air Liquide are the leaders in the production among the corporations.
The only operating helium plant in Russia, part of Gazprom Dobycha Orenburg, is located in Orenburg. Ms. Ogrel noted that in 2011 the helium output decreased significantly. This was caused by the decrease in supplies to liquefaction center maintained by Orenburg branch of Cryor Company which stopped purchasing technical helium after Gazprom Dobycha Orenburg had raised the price almost twice; while in 2010, 80% of helium was supplied to this liquefaction center. At the moment Cryor is using the processing scheme.
Russian gaseous helium is mainly consumed by specialized companies. Consumption volumes in the first half of 2012 (1.76 million cubic meters) are similar to the previous year. NII KM receives supplies limited by a quota of 30 thousand cubic meters per month. This volume is insufficient and due to the shortage, the Company does not sell technical helium and practically almost all volumes are being liquefied. Techgas also receives helium limited by quota - 30-35 thousand cubic meters per month. The Company sells technical and liquefied helium. Helium consumption in Russia is growing: it has marked an increase of over 50% in 2011. The main driver of domestic consumption is the use of helium in advertising dirigibles and balloons. Liquefied helium consumption also grows, mainly due to the increased number of MRT units in use. According to Infomine, helium consumption in Russia can reach 4 million cubic meters by 2015. Growth rates will be around 15-20% and will depend on helium plant capacity.
Helium export significantly exceeds helium import. Messer, Air Liquide and Matheson are the major foreign consumers of the Russian liquefied product. However, Ms. Ogrel noted that the main trend for the last two years was a decrease in export and increase in import of liquefied helium. In her opinion, further increase in the supplies of liquefied helium should be expected, especially after the launch of production in Qatar, which will contribute to additional volumes of liquefied helium in the international market. The import of gaseous helium in Russia is formed by the grades that are not produced by Russian companies or are produced in insufficient volumes.
Quite soon Russia will proceed with development of gas condensate fields in Eastern Siberia and in the Far East, which will allow a significant increase in the country’s share in the world market. In this context, according to Ms. Ogrel, Russia needs to develop helium recovery and purification technologies; to establish the transportation system for helium condensate and liquefied helium; to create government reserves based on underground storage tanks and to elaborate the creation of helium export framework.
Leontiy Eder, Head of Laboratory at Trofimuk Institute of Petroleum Geology and Geophysics of Siberian Branch of RAS emphasized the necessity for adequate choice of location for future helium production and processing site and helium concentrate storage. Representatives of the Institute suppose that the entire infrastructure should be located not far from the Chayanda field. Implementation of the project will allow extraction of 34-40 billion cubic meters of gas per year. About 70 million cubic meters of helium could be recovered from these volumes. In the near future a large center for helium concentrate production, storage and purification shall be created at South of Irkutsk region on the basis of Kovykta field. The Institute permanently informs Gazprom about the current results. Mikhail Parfenov, Deputy Head of Industrial Production Marketing Department of Gazprom, mentioned that the Company expects government support in the projects implementation, and at the first instance in the formation of storage system for excess volumes of helium. It will be much more complicated to unlock the potential of Chayanda and Kovykta fields without such a support.
Dmitry Mironov, Deputy CEO for Sales of Gazprom Gazenergoset has informed that the Company is the only Gazprom operator for helium gas sales in the Russian Federation since January 2012. This measure will allow meeting the domestic demand for helium promptly and to the entire extent. The Speaker mentioned that helium sales on domestic market increase constantly: in 2010 sales amounted to 1.9 million cubic meters, in 2011 – this indicator was 20% higher and this year volume will be 30% higher. Mr. Mironov commented on the consequences of helium price growth: during the previous years helium business incurred million dollars losses to Gazprom. Price growth made it possible to change the situation for the better. At present the Company is not dealing with liquid helium, but helium liquefaction plant of Gazprom Gazenergoset will be launched in Orenburg in 2014. Since that moment the Company shall be in charge of liquid helium prices, and as Mr. Mironov declared, the prices will be legitimated by the market. The speaker noted that the company has interest in long-term contracts, such as annual contracts with fixed prices, for instance. Nikolay Gesko, Deputy Head of Sectoral Programs Department of Gazprom Gazenergoset mentioned that the high price for Russian helium is caused by the low content of helium in Orenburg field gas – 0.04%. The higher content of helium in reserves of Chayanda (0.58%) and Kovykta (0.24%) fields will simplify production and lead to decrease of product prices. Although there is another problem: where to market the future production of 25 million cubic meters of gas from each field?
Dmitry Mironov also mentioned that there is a current deficit in the helium market. Specialists of Gazprom Gazenergoset are looking for ways to settle this problem, which hopefully will change the situation. Principles of work on helium market at the moment are discussed with Federal Antimonopoly Service of Russia. The most important consumption areas for the country are medicine, defence industry, nuclear power engineering, aerospace and instrument engineering and other strategic industry sectors.
Sergey Molchanov, Director of Helium Plant of Gazprom Dobycha Orenburg shared his experience in the helium production. The first block of the helium plant was launched in December 1977 and the first batch was produced in April 1978. Today 5 blocks are in operation and each of them is unique. The speaker stressed on the fact that advanced technologies were applied in blocks construction and these technologies are still competitive. The Plant produces 5.2 million cubic meters of helium per year and the list of product consumers includes 500 market players. The Plant covers helium demand not only in Russia but also in the CIS. The speaker considers that cluster for technological development and training of specialists should be created on the basis of Orenburg plant. The Company makes arrangements to maintain the production volume of 5 million cubic meters for the next ten years, which is quite a task taking into account the low content of helium in gas. Increase of production is not in the plans.
Oleg Ganushkin, Development Director of NII KM spoke about the experience of the Company in the gas market. The Company produces industrial and pure gases, food and welding mixtures, laser gases as well as helium and mixtures based on it.
Starting in the middle of 1990s the plant gradually formed helium market by meeting the customers needs, upgrading quality of production and issuing normative documents (technical specifications) for new products. Production of helium of pure and superpure grades is one of the priorities in the production development in NII KM. The Company disposes considerable facilities for helium collection and storage. The Company’s helium gas storages amount to 60 thousand cubic meters and 30 thousand liters for the liquid product. The Plant has a testing laboratory. Raw materials for helium production are supplied from helium plant in Orenburg. Mr. Ganushkin also presented the structure of helium sales in 2012: liquid helium – 70 %, pure helium – 20 %, technical helium – 9 %, remaining volumes were delivered in the form of helium mixtures. Herewith the speaker emphasized that considering the existing helium shortage, sales structure does not reflect the real market demand. In this year the Company finds it difficult to provide consumers with pure helium provided that technical helium sales declined in July 2012. All supplies are divided by quotas, taking into account the volumes of raw materials received from Orenburg, with significant delay of delivery. Helium consumption growth until 2015 is expected to be 10-11 % per year, and prices for pure helium will increase by 10-15%.
The Company faced a problem of helium quality loss in cylinders stored for 24 months. In the opinion of NII KM engineers, the reason for this is the significant wearing of the Russian cylinders park. The specialists of the Company start thinking about delivering helium gas in new imported containers in the near future. The Company focuses on retail delivery of helium in Moscow region, Nizhny Novgorod and St.Petersburg, direct supplies for customers, and sales through the dealership network. Mr. Ganushkin is convinced that all market players can find a place in the market and he appealed for cooperation to all companies concerned.
Igor Levin, First Deputy CEO - Executive Director of NII KM reported that 300 thousand cubic meters of helium were supplied from Orenburg in the period of January - October this year. Part of it has been supplied by Technical Gases Technologies Company. NII KM also purchases helium from abroad. At present the Company has sold about 500 thousand cubic meters of helium, whilst the planned volume for 2012 amounts to 700 thousand cubic meters and is based on the results from the previous year and on the potential growth forecast. Mr. Levin mentioned that during this year the volume of actual orders reached 1 million cubic meters, but taking into account available helium sources for processing, the Company has to decline customers’ orders. By the end of the year NII KM will arrive to the volume of 600 thousand cubic meters.
Aleksey Gulbin, Deputy Head of Advanced Technologies Division of Gazprom Razvitie informed that helium has unique characteristics and is available in commercial volumes only in natural gas. The speaker stressed on the importance of the government support which should not be limited to the adoption of the Law on Helium. Pavel Zavalny, Deputy Chairman of Energy Committee of State Duma of the Federal Assembly of the Russian Federation mentioned that the Government plans to hold roundtable discussion devoted to helium industry problems, including the government control over the industry. The main market players shall be involved in this work.
Mr. Gulbin also torched upon helium storage in USA. The law on helium was enacted in the United States in 1925. Helium was treated as a strategic product for a long time and as a result, it was stored at the gas storage in Cliffside. However, deregulations led to exports of reserves from the storage. This measure was caused mainly by the drop in helium production in USA. Nick Haines, Head of Global Helium Source Development at Linde Global Helium noted that the volume of the reserves in the American storage decreases rapidly and at the moment it amounts to 400 million cubic meters. In his opinion, helium reserves will be exhausted until 2018-2020. However, the American legislation on helium will be changed soon. The new project for blocking the Cliffside remaining reserves is currently under development. However, Mr. Haines mentioned that this year is the year of presidential elections and that is why the draft law overstayed between the two Congress houses. Nevertheless the expert hopes that the new legislation will be enacted before all the helium from the storage has been sold out.
This fact may help increasing the share of Russia on the international helium market. Nikita Pozdnyakov, Deputy Head of Marketing and Export Development Department of Gazprom Export said that the prospects for the Russian export are quite optimistic. The expected exhaustion of American Bush Dome helium storage, providing now about 30% of world consumption, will create favorable conditions for Russian products entering the export market: Gazprom plans to step into the international market with helium from Eastern Siberia and Far East just when a significant helium shortage appears globally. The Company cooperates with the key foreign market players but it is early to speak about contracts before locations and volumes of the future production have been determined. In the opinion of Mr. Pozdnyakov, Gazprom will probably be ready to export about 60 million cubic meters of helium annually by 2020. This amount corresponds with the current volumes supplied from Bush Dome storage. The expert stressed that first of all, Gazprom is a gas company and does not plan to develop retail supplies of helium and technical gases. Therefore, helium sales will mainly be targeted to the five largest international wholesale companies, which are currently in control of the international helium market. Another important issue is the provision of relevant amount of transportation tanks for the future supplies. Mr. Pozdnyakov mentioned that the corporation shall continue to actively study this matter with the future purchasers, in order to take the appropriate logistic solutions and to place orders to the manufacturers of specialized transportation tanks on time. Where will Russian helium go? Nikita Pozdnyakov noted that, with allowance for the potential location of helium production sites, the most logical direction of export is the East direction. At the same time in case of development of effective logistics there will be no barriers for export to the West. Assessing the potential markets Gazprom primarily focuses on the global demand for helium and not on particular countries. Thus, in case of proven logistics and effective application of swap supplies mechanisms the helium shipped from the Far East potentially can be forwarded to all markets, including the distant ones.
During the roundtable discussion Mr. Pozdnyakov commented that it is important to make economically valued, reasonable decisions and avoid speculations while planning the future Russian helium projects. The topic of helium is often depicted in mass media with dramatic mood and is followed by declarative speeches about the great role and importance of helium projects in Eastern Siberia for the future development of the industry in Russia. But the reality is that consumption of helium in the country is 2 million cubic meters per year, while Orenburg helium plant annually produces 4.5-5 million cubic meters. So the domestic consumption will be covered by current production in Orenburg, and the new production facilities in Eastern Siberia will be oriented on export. According to Mr. Pozdnyakov, it is important to consider solutions that provide effective export supplies of helium when the specialists plan infrastructure for production, transportation and storage of helium from Western Siberia. The importance of storage of the valuable, unique product is not in question, and the strategic storages of helium should not be constructed independently, but with the opportunity to monetize the stored volumes of helium following the growth of global demand on the product.
Vadim Udut, CEO of Heliymash said that helium is the key to the high technologies. The consumption of the product in the USSR was 4 million cubic meters, and the country was one of the global leaders. Mr. Udut expressed his confidence in the growth of domestic helium consumption, because Russia has great scientific potential, especially in the energy-related industries. Exploration of Chayanda and Kovykta gas fields will give the country the necessary impetus for the development of its own technologies and the machine building. The speaker also marked the importance of the creation of underground storage. “Now, when the storage in Cliffside begins to “sneeze”, all the helium world “sneezes” too. The best way of storing helium is to avoid the untimely development of the fields,” – Mr. Udut said. In his opinion, it is necessary first of all to develop helium production technologies to a high level. The speaker also marked that now there is only one exporter in the market but the exploration of the gas fields in Eastern Siberia and the Far East will give an opportunity to other players to grow up.
Representatives of the leading foreign players gave their vision on the Russian helium market and its integration into the global market. Kalevi Korjala, Managing Director of Woikoski Company said that Russia is a strong player on the helium market. The Company is interested in signing long-term contracts with Russian players and does not plan to participate in the spot market. The product price is the main factor for the Company, that is why Mr. Korjala thinks that 3-year contracts with fixed price are the preferable way of cooperation. Christoph Launer, Vice President of Messer Group said that the current market situation is complicated but he hopes that the situation will change with the start of Russian gas field exploration. Orenburg is the main helium supplier for the Company but the volatility of prices on helium does not satisfy Messer. Phil Kornbluth, Executive Vice President, Helium & International of Matheson Company said that the Company wants to purchase helium from Orenburg directly. Also Mr. Kornbluth said that Russian companies should maintain a rational economic attitude to the helium export. The necessity of helium storage construction is obvious but it should not be too large. According to Mr. Kornbluth, the optimal storage volume is three billion cubic feet. Apart from the high price of the storage construction, the Companies will have to pay for re-extraction of helium. Also the players should be careful with legal and regulatory changes. “Everything has to be paid for, the most important is not to make it senseless” – Mr. Kornbluth said. Executive Vice President also commented on the positions of USA in the global market. According to Mr. Kornbluth, he can see the country as an importer of helium in the future. But there are large volumes of helium near Wyoming and the country plans to explore them. Benoit Pacreau, Sourcing Director of Air Liquide marked the importance of creating helium storage system. Nick Haines said that Linde looks at the development of Eastern Siberia and the Far East fields with optimism and supports Gazprom in this.
Technological aspects of helium industry have also been discussed at the event. Natalia Kislenko, Head of Perspective Technologies and Pre-investment Research Department of Gazprom Razvitie compared cryogenic and membrane technologies of helium production. Membrane technology has a little bit lower product gas to raw gas ratio (98.3% versus 98.5%), but it significantly reduces the costs on energy and construction. The membrane technology efficiency has been proved by the tests held at Markov field by Gazprom Dobycha Krasnodar Company. Now Gazprom decided to create two-step test production line of membrane helium production at Kovykta gas condensate field utilizing the data received during the design of the production lines for Chayanda field. According to Ms. Kislenko, the choice of technology of helium production must be done on the bases of certain tasks considering the actual situation and the technological limits. Manu von Levenhaege, Technical Service Manager of UOP Company presented modern solutions for helium production from natural gas. The Company has already constructed over 140 systems which use hollow-fiber or roll membrane technologies. The three-stage system allows to reach 80% helium content which consequently can be pumped back into the layer for storage. The speaker stressed the fact that the membrane technology is better because of its simplicity and reliability. Nick Wynn, Chief Operating Officer of Membrane Technology and Research Company agreed that simplicity and passivity of the membrane systems are their main advantages. Furthermore, such systems cannot be damaged by gas temperature or gas composition. The membrane systems can operate in ambient temperature and are small in size.
Rafik Utiushev, Technical Director of Podzemneftegas Company presented the technology of helium storage in salt formations. The storages can be located in the underground salt layers. The caverns for helium may have length from 100 to 150 meters, while the volume of one reservoir is 50-100 thousand cubic meters. Helium if pumped into the reservoir by a membrane compressor. The losses during storage exploitation would not exceed 0.3%. The speaker stressed the fact that the exploitation of salt reservoirs for petrochemicals and gases has not caused problems connected with seisms. Hence there should not be any problems with helium.
Pavel Smolyar, Sales Manager of Air Liquide Global E&C Solutions Lurgi Company spoke about Ras Laffan II project in Qatar. The first production line was launched in 2005 and its capacity is 10 tons of liquid helium per day. With this launch Qatar entered the global helium market and the share of the country reached 10% of the global production volume. Ras Laffan II will be launched in the first quarter of 2013 and its capacity will be 20 tons per day. So it will be the largest production line for helium liquefaction in the world. A turn-key contract has been signed for the project. After the launch of the production line the share of Qatar in the global market will reach 28%.
Russian companies are also ready to produce the necessary equipment and components. Mikhail Kuznetsov, Head of Department of Cryogenmash Company presented helium equipment produced by the company. The enterprise manufactures cryogenic helium systems, helium liquefiers, product cleaning blocks, cryogenic cylinders for transportation, turbo-expanders. Cryogenmash offers ready process solutions. Mr. Kuznetsov said that the Company is ready to participate in projects on competitive basis.
Fares Kilzie, Head of Creon Energy believes that the presence of international partners and their active participation in the formation of such a large cluster named “helium business” is an extremely important factor for the success of all the parties concerned. No matter what vector of the future development of Russian helium industry is chosen, great perspectives are open for all market participants.