Is investing in Helium just hot air or the real deal?
Updated: Jul 19, 2022
How Canada’s oil and gas industry can lead the ethical exploration and extraction of helium.
My name is Cory, I am the President of Creative Return and the host of The Insider’s Guide To Business. The following are my insights and learnings from the interviews and dealings I have with talented entrepreneurs, operators and financiers. I hope you find them valuable and applicable in your endeavours.
Mention the element helium to most people and two images come to mind – birthday balloons and squeaky, high-pitched voices. Helium is fun.
It’s also serious business.
In fact, our world is now overly-dependent on this critical resource. No, there aren’t more people celebrating birthdays with floating balloons. Rather, helium has become such a crucial component to many aspects of modern daily living.
Helium Powers Life
It’s hard to not find an important use for helium. It’s necessary for medical uses, such as combining it with oxygen to make heliox, a gas used to treat respiratory ailments like emphysema and asthma. It is also used to quickly cool the magnets used in MRI machines and improves the resolution of microscopes. In technology, helium is used to make high-speed internet and tv cables, semiconductor chips used in the manufacturing of phones, TVs and computers. Computer hard drives are much faster now that helium has replaced the air inside them. Helium is also routinely used to detect leaks in the hulls of ships, air conditioning lines in cars and high-pressure systems like vacuums. It is even used in space travel!
While industry has long known about the important need for helium, investors do not. And it’s an investment opportunity Chris Bakker thinks people need to know about. He’s the CEO of Avanti Energy Inc. Long a traditional oil and gas guy, he’s confidently turned his focus towards helium.
I had the pleasure of interviewing Chris on The Insider’s Guide to Finance (now Business) in mid-2021. It was a great interview.
Full Disclosure: I am a former board member of Avanti Energy (TSXV: AVN) and a minor shareholder. None of this article should be considered investment advice. These are my own opinions. Seek your own independent investment advice.
Helium is also a paradox, wrapped in a mystery. It is the second most abundant resource in the universe, accounting for almost one quarter of the mass of the universe. Astonishingly, the sun produces about 600 million tons per second.
Yet, here on earth, helium is a non-renewable resource. It is created naturally as a result of the very slow decay of uranium and thorium.
An escape artist because of its light weight, it often floats up to natural gas deposits where, in Canada at least, it gets trapped by cap rock. Helium that finds its way to the surface escapes the Earth’s gravitational pull, lost forever in space. Some researchers expect we have a few decades’ supply of helium left.
The war in Ukraine, unanticipated challenges with some key overseas suppliers and the worldwide supply chain problems caused by Covid are strangling an already tight supply. Predictably, prices have jumped and hover around $US300 mcf, up from about $US100 mcf just a few years ago.
Those relying on helium are growing worried. Researchers in the chemistry department at the University of Windsor say they should expect to receive much smaller amounts than in previous years, resulting in they fear they soon might not have enough supplies to cool their equipment. This means critical medical research may not continue.
The New Frontier
Fortunately, Canada is well-positioned to benefit from the helium demand. Canada is home to the fifth-largest supply of helium, the majority in Alberta and Saskatchewan. Many reservoirs in these provinces seem tailor-made for helium production, large enough and boasting sufficient caprock to contain it and in concentrations and with pressures that make it flow easily.
I want to go further on this and celebrate our Canadian energy industry.
It is because of the professionals in our oil and gas industry who innovate and navigate the very stringent ESG regulations that we can produce ethically sourced fossil fuels. Yes - it is a dirty business, but it sure as hell beats importing it from Russia and Saudi Arabia, doesn’t it?
Western Canada is a responsible world leader in oil and gas exploration and very possibly in helium exploration and production. We Canadian’s should be very proud about this!
Back to helium - quietly, a growing number of explorers are turning their attention to this gas, partially because it is produced using conventional methods and requires significantly lower costs than natural gas. Return on capital is potentially much stronger than natural gas.
Now, with the growing need for helium, Calgary and Alberta have an opportunity to apply these world class skills and standards to the exploration of a resource that the world needs - maybe even more than oil.
If you are interested, you can listen to Chris' episode of the podcast here: