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Selling the Nation’s Helium Reserve 2 The Helium Supply Chain INTRODUCTION The supply chain for helium, beginning with its origins as a constituent of natural gas through its production and delivery to the hundreds of thousands of helium users around the world, is a complex structure. Its makeup and how it will impact and be impacted by committee recommendations are discussed in this chapter. The discussion begins with raw helium sources, focusing on the conditions that must be met before helium extraction facilities are developed. This is followed by a short discussion on how the raw helium is first processed into crude helium and then refined into the product that eventually is delivered to end users. The primary and secondary distribution systems are then described, first for the United States and then for the rest of the world. Particular issues that relate to the focus of this report are highlighted throughout the chapter. RAW HELIUM SUPPLIES Currently, the only commercially feasible source of helium is its extraction from natural gas, and then only when the following conditions are satisfied: The natural gas fields in question are of sufficient volume that the amount of helium projected to be extracted justifies the expense of installing helium extraction facilities;
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Selling the Nation’s Helium Reserve The concentrations of helium in the fields are from 0.04 to 0.65 percent; the concentration at which extraction is economically feasible depends on how the natural gas will be processed; Any refined helium to be produced will have affordable access to worldwide markets; and The overall economics of the project, not just the volume of gas, justify the capital required to install and maintain the extraction facilities. These conditions have been satisfied in the United States for many years and are now being satisfied in several other countries, including Poland, Russia, Algeria, Qatar, and China, with a new source currently being developed in Australia. It is likely that helium will also start to be extracted from natural gas in Canada, Indonesia, and Iran during the coming decade, with additional sources being developed during the next 25-50 years. More detailed information is provided in Chapter 4 about the estimated quantity of raw helium in these sources, both now and in the foreseeable future, and the current and future global capacities for extracting helium from them. Figure 2.1 shows the locations of important international helium recovery and production operations as well as the destination of shipments of helium to significant markets around the world, details of which are discussed later in the chapter. The three most important natural-gas-processing operations from which helium is extracted are these: The processing of natural gas to extract natural gas liquids (NGLs) such as propane, ethane, butane, and benzene for fuels and as feedstocks for petrochemical production. This is the helium recovery, processing, and liquefaction basis for the midcontinental helium operations in the Hugoton-Panhandle fields that span Kansas, Oklahoma, and Texas, and were the basis for the U.S. government’s recovery of crude helium during the strategic recovery program through the 1970s. They are discussed in more detail in Chapter 5. Figure 1.3 shows the location of important sources of helium in the United States. The extraction of natural gas streams rich in CO2, where the CO2 is used for enhanced oil recovery (EOR) and the methane in the natural gas is piped to methane markets. This is the process on which ExxonMobil’s large helium operation in the Riley Ridge fields in Wyoming is based. The processing of natural gas into liquefied natural gas (LNG) for shipment to many of the world’s energy markets. This is the basis for the large helium recovery, processing, and liquefaction operations in Algeria and Qatar and will support future helium recovery operations in those countries and elsewhere.
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Selling the Nation’s Helium Reserve FIGURE 2.1 Origin and destination for large segments of the 6.5 Bcf/yr helium market in 2008 (the following figures are the approximate amount of helium consumed in each region): United States, 2.8 Bcf; Canada and South American, 0.3; Europe, 1.7; Asia, 1.5; Africa, Middle East, and India, 0.15. SOURCE: CryoGas International. HELIUM PRODUCTION The first part of the helium supply chain involves processing the natural gas to remove the raw helium and impurities, and then processing it further to get refined helium. Box 2.1 describes these processes in more detail. In facilities not connected to the Helium Pipeline, the processing of natural gas to remove the crude helium and then to produce refined helium typically takes place in a single plant where the crude and refined processing are closely connected. However, the helium extraction and refining facilities connected to the Helium Pipeline have been constructed such that extraction plants can deliver crude helium directly to a refining facility or to the Helium Pipeline, and the refining facilities can, by the same token, process crude helium supplied either from an adjoining extraction facility or from the Helium Pipeline. The natural gas companies that produce the crude helium have operations involved in natural gas recovery, pipeline transportation, and processing for NGLs. The helium refining companies operating in fields connected by the Helium Pipeline typically have long-term—15- to 25-year—crude helium supply contracts with the industrial gas refiners that have been operating along the Helium Pipeline
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Selling the Nation’s Helium Reserve BOX 2.1 Producing Helium from Natural Gas Processing of the helium found in natural gas occurs in two stages. The first step is extracting crude helium (which, after extraction, typically is composed of 50-70 percent by volume of helium) from the stream of natural gas. The second step involves further refining the crude helium to produce purified helium of different commercial grades. Crude Helium Production The specific procedure followed for extracting crude helium from natural gas depends on whether the natural gas is being processed to produce methane and natural gas liquids (NGLs) or other source gases such as CO2 or is being converted into liquefied natural gas (LNG). The extraction process typically requires three sequential operations. First, impurities such as water, CO2, mercury, and hydrogen sulfide are removed from the gas using various extraction and absorption processes. Second, high-molecular-weight hydrocarbons are separated by passing the gas stream through a bed of activated carbon and having the heavier hydrocarbons affix to the activated carbon surfaces. Finally, cryogenic distillation separates and removes most of the remaining methane gas. The end product is a gas mixture typically containing 50-70 percent helium, with the remainder primarily nitrogen and smaller amounts of argon, neon, and hydrogen. In the United States, before natural gas containing raw helium will be considered “crude helium,” it must have a helium concentration of more than 50 percent and only limited amounts of certain impurities such as H2, which must be less than 20 parts per million (ppm). These specifications were set early on by the Bureau of Mines, BLM’s predecessor in managing the Federal Helium Reserve, and allow the crude helium to be stored in the Bush Dome Reservoir and then successfully withdrawn, compressed, processed through the Helium Enrichment Unit and supplied for processing to the refining and liquefaction plants along the Helium Pipeline. Refined Helium Production Final purification of helium usually is done in stages, with the precise method dependent on the crude helium’s purity and intended use. A typical process involves first cooling the crude helium to temperatures at which nitrogen and methane condense into a liquid. That liquid is drained off, leaving a gas of approximately 90 percent helium. The gas is then warmed, combined with air enriched with oxygen, and passed over a catalyst that allows the oxygen and hydrogen to combine into water vapor, which is condensed and drawn off. The remaining gas then enters a pressure swing adsorption (PSA) unit that ultimately yields helium at better than 99.99 percent purity. Further cryogenic adsorption processes can increase helium purity to as high as 99.9999 percent. LNG Processing The process for extracting helium from LNG tail gases is similar to the final purification steps just discussed, since the gas remaining after liquefying methane is similar to the crude helium that is the end product of the cryogenic distillation process discussed above. Passing the gas through catalytic adsorption and PSA units produces helium up to 99.9999 percent pure. The end product of the refining process is liquefied helium.
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Selling the Nation’s Helium Reserve since the 1960s. These helium refiners are leading international companies in the industrial gas industry, and each has developed or licensed significant helium-processing and low-temperature cryogenic liquefaction technology. These same companies also are responsible for the design and construction of most of the world’s helium refining plants and for virtually all of the primary distribution of the refined helium gas and liquid from the United States and international plants to the largest direct users of helium and to their own or other distributors’ redistribution centers around the world. Details of this distribution network are discussed in the following section. REFINED HELIUM SUPPLY CHAIN This section discusses the network that has developed for supplying refined helium to all but the largest end users. Because most of the refined helium supplied to the world originates in the United States (over 75 percent in 2008), this section focuses on that network. Figure 2.2 shows a simplified schematic of the U.S. helium supply chain. The chain starts with the extraction and processing of helium from natural gas and proceeds to the purification and production of refined helium in liquefied form, both processes discussed in the preceding section. The next link in the supply chain is placing the liquid helium into the primary distribution system, where it is trucked to very large customers, redistribution/transfill depots (referred to as “transfills” throughout this report), and ports serving ocean shipping to foreign markets. The final phase of the supply chain is from U.S. redistribution depots to a wide variety of end users. Primary Distribution of Liquid Helium Primary distribution of liquid helium, from the refining plants to large liquid helium customers, to transfill depots, and to U.S. ports for export to foreign markets, is performed in very large tankers (1.5 MMcf capacity) or in specially designed ISO liquid helium containers (1.1 MMcf capacity). Figure 2.3 shows a typical liquid helium plant and the types of containers used to transport helium from helium refiners to the next leg of the distribution network. ISO containers permit interchangeable deliveries directly to very large volume U.S. users and to U.S. ports for ocean shipping to Europe, Asia, and other parts of the world for secondary redistribution in those markets. The cost of this cartage can be quite high as the tankers and specially designed ISO containers are very costly triple-walled, high-vacuum, superinsulated containers. Exported liquid helium is shipped as deck cargo on container ships in ISO containers of the above description; the maximum holding time without signifi-
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Selling the Nation’s Helium Reserve FIGURE 2.2 The helium supply chain in the United States, from the sourcing of crude helium to the production of refined liquid helium (LHe) to final delivery to customers. The principal companies engaged in each link of the supply chain are identified: AP, Air Products and Chemicals, Inc.; Linde, Linde North America Inc., a member of the Linde Group; AL, Air Liquide; Praxair, Praxair, Inc. SOURCE: CryoGas International. FIGURE 2.3 U.S. liquid helium plant (in the rear), helium tankers (attached to the truck and on the left), and International Organization for Standardization (ISO) containers for overseas shipment (middle and right). SOURCE: Air Products and Chemicals, Inc.
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Selling the Nation’s Helium Reserve cant helium loss is 30-45 days. In the United States and Europe, gas and liquid are shipped to customers with large volume requirements in tube trailers (as a gas) and in tankers and ISO tanks as liquid helium. Tankers drop off or fill ISO tanks for a few very large customers (for example, General Electric’s MRI manufacturing operations at Florence, South Carolina). Some medium-sized customers are served directly from refiners’ plants by gas in large tube trailers if the distribution distance favors that channel, generally less than 500 miles from the plant. An important part of U.S. primary helium distribution is the delivery of ISO tank liquid helium to the ports of Newark, New Jersey, and Long Beach, California, for ocean shipment to ports around the world. Those ports serve large helium markets in South America, Europe, the Middle East, and Asia. Primary redistribution depots are located at these ports for direct transfill to the kinds of distribution equipment noted elsewhere in this chapter or for routing in ISO tanks to large helium customers inland. The three main international companies in the supply chain are involved in all stages, from producing refined helium to servicing the end-use customer: Air Products and Chemicals, Inc., Linde North America, Inc., and Praxair, Inc. ExxonMobil is the largest liquid helium producer, with its crude feed coming from helium-rich CO2 and methane gas fields in Wyoming. Airgas, Inc., Air Liquide, Matheson-Trigas, Inc., Air Products, and Praxair are buyers of liquid helium from ExxonMobil and are the most important players in the primary and secondary parts of the supply chain. Air Liquide, Air Products, Linde, Matheson-Trigas, and Praxair are the main companies involved in primary worldwide helium distribution. These companies also have significant access to the international end-use customer population and are responsible for many of the technology and applications developments in helium use and conservation. Most of the industrial gas and therefore helium markets of the United States, Europe, South America and Asia are dominated by the five large international gas companies that control the worldwide market for helium—Air Products, Linde, Praxair, Air Liquide, and Taiyo Nippon Sanso. Because independent distribution and service in these important regions are limited, the barrier to entry in the distribution to and service of even the smallest of helium customers is very high. Secondary Distribution of Helium Secondary distribution channels handle most of the helium delivered to end users in the United States. The companies in this channel include the same large industrial gas companies that dominate primary distribution mentioned in the preceding section and many private, independent industrial, medical, and specialty gas distributors. There are more than 800 such distributor-type companies in the United States.
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Selling the Nation’s Helium Reserve While most helium is transported as bulk liquid to the very large volume customers and to transfill and redistribution depots, U.S. industrial gas distributors deliver to the small and medium volume end users in a wide variety of smaller containers: High-pressure steel cylinders containing 10 to 300 cf of gaseous helium; High-pressure tube trailers containing 30,000 to 180,000 cf of gaseous helium; Dewars containing 50 to 500 L of liquid helium; and A variety of specialized containers for gaseous and liquid helium for specific applications. Figure 2.4 illustrates some of the many storage containers in which liquid and gaseous helium are delivered to end users. FIGURE 2.4 Small-volume helium storage containers: (A) cylinders of gaseous helium; (B) dewars of liquid helium (appearing in the background); and (C) high-pressure tube trailer carrying gaseous helium. SOURCE: Air Products and Chemicals, Inc.
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Selling the Nation’s Helium Reserve Many of the contracts for the supply of refined gas and liquid helium to very large customers take the long-term form of crude-supply contracts. Terms of sale to other customers might be under contracts of varying lengths and subject to varying pricing terms. Sales of helium in cylinders to smaller customers typically are spot sales, with helium delivered when needed by the customer. The pricing of helium to end users is complicated by the wide variations in transportation and packaging costs associated with each user. There are distinct costs associated with the packaging and delivery for each of the above containers. The pricing must include the costs of transporting helium along the primary distribution channels and then delivering it to transfill depots for secondary distribution or to ports for ocean shipping to foreign customers. Estimating the costs and therefore the amount to be charged for primary distribution to customers in other countries is complicated by the high cost of ocean transport and the wide variations encountered, and the subsequent trucking costs from the foreign receiving depot to inland transfill points.