The Gas City could be harnessing a major new source of revenue.
According to a briefing note attached to the latest agenda for Medicine Hat’s Energy and Utilities Committee, the city’s energy corporation will be drilling a well to produce helium in the near future, and moves would be made to locate a helium upgrader inside the city.
Long term benefits from construction and operation jobs are expected from the move to both produce and refine helium, though an exact number for the expected jobs was not included in the briefing.
The city expects to partner with other entities in the project, though the anticipated partners were not named. The royalty regime in Alberta was also described as ‘economically restrictive and non-competitive’ compared to Saskatchewan, with discussions underway with the government of Alberta about the issue.
“Therefore, in the interim, drilling and production is expected to occur only in Saskatchewan,” the note states.
Specific details of NGPR’s plan to produce the gas are included in the briefing note. With the company’s area of focus, a high rate of production was said to be needed due to the helium concentration being low in the area.
The note states NGPR has recently been granted its first helium exploration permit in Saskatchewan, with additional permits expected to follow. Mineral tenure in Alberta has also been secured, with methane being a secondary target.
“The helium potential of southwestern Saskatchewan is well known and also expected to be present in southeastern Alberta,” reads the note.
“Synergies exist in the search for helium and the conventional oil and methane targets so both targets can often be tested in a single project. The demand for helium is expected to grow and very strong pricing is anticipated for the commodity in years to come.”
The note anticipates that worldwide shortages in helium will be the result of a lack of recent new investment in helium production, along with the sale of strategic reserves of the gas by the United States.
“Helium cannot be transported by pipeline,” the briefing states.
“As a result, significant production facilities need to be built in close proximity to the production. The upgrading of helium from gas to liquid (easier to transport and more pure) also requires specialized facilities.”
The briefing anticipates that only one helium upgrader would be needed in Alberta, and the early location of that upgrader in Medicine Hat would mean long-term economic benefit to the city, and a barrier for the entry of potential competition in the helium market.
“The upgrader decision will be brought forward later in 2017 for discussion and is considered by NGPR to be a standalone decision separate from the helium exploration activities ongoing within the approved Growth Strategy,” reads the note.
The operation to produce helium would be an expansion of the existing Natural Gas and Petroleum Resources Department (NGPR), not a new business. Funding for the exploration of a well would be funded from the city’s capital budget, with reserves used to fund the upgrader and the production facilities for the valuable gas.
The reserves would be drawn from the NGPR capital budget, with the briefing note indicating no need for a budget amendment due to full funding.
An implementation plan attached to the briefing indicates the first exploration well will be drilled in western Saskatchewan in 2017’s third quarter, and five more wells are expected in 2019 in the same province.
The committee will be meeting Thursday afternoon to discuss the idea.
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