Now, here's something I've learned over the years, which is that any time we are talking about new commodities, it's often like harder to find anything resembling spot prices at all, including a lot of the rare earths and stuff. There's actually literally nothing on the terminal about helium pricing. And tell us about why that is.
Yeah. So it's a pretty unique market. I mean, there used to be more markets like this, but companies like Bloomberg and many others have helped to make things a lot more efficient. You know, in general, the price to the end user, it's considered to be about a 6,000,000,000 cubic foot per year market and worth about $6 billion a year. So that implies about $1,000 per MCF to the end user. And, you know, an MCF is 1,000 cubic feet. That's the standard denomination that they use in natural gas. Okay. You know, so that implies that it's a dollar for one cubic foot. And since you insisted on bringing a helium balloon into the studio, I would fact check you and say, what did you pay for that?
Hello and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.
Tracy, one of the things that I've been learning over the last few weeks is that a lot more than oil comes, you know, for real. Like, say, you know, if there's war breaking out in the Middle East, you just think about oil, right? And that's probably actually where my mind would typically stop — what's the price of oil? And we all are watching the price of oil. But there are a lot of other things that are sourced from the region that are of critical importance. I'm not joking. Like, I'm just saying, like.
I'm laughing because we have one of those things floating between us.
So speaking of stuff that comes out of the Gulf region, here's one of those things. Listeners can't see it. Not the aluminum itself, although probably aluminum also comes out of the Gulf, but helium. Tracy is holding a helium balloon. She went out and got a prop. I didn't. One of our lovely producers did it. I have to say, I haven't held a balloon for a long time and it's surprisingly entertaining. So, okay, well, you hold on to it. Go a little bit further, which is I feel bad for the people in helium, because my understanding is that the helium has some pretty important industrial properties. There's not a lot of substitutes for it, but someone says helium and look, oh, the clowns are going to be able to make their funny voices. It's like any chance we have to actually bring one of the commodities that we talk about on the show into the studio, I'm going to seize it. So here is some helium.
Well, look, the fact that the balloon is floating is an indicator of the fact that it must have some interesting properties as an element that perhaps, you know, perhaps have other applications. I don't know. I mean, it tells you something about it as an element.
Well, it's funny you mention that because initially I was going to take this balloon and, you know, do the thing where you breathe in the helium and have the funny voice. Well, I thought for an audio medium maybe it would work. But then in the course of researching on helium, I read about it. Apparently it comes partially from radioactive decay. And so I thought, well, maybe I don't want to be breathing in the helium, although I also read that it's nontoxic, so I don't know. We need to talk about what helium actually is. Clearly.
That's right. And we've been getting requests for a helium episode ever since. There was a headline out today, Qatar, some helium production. That is not going to that one of those first measures or something like that. Anyway, there's been a lot of request for a helium episode. We've never done one. Incidentally, years ago I used to lift weights with this guy in the East Village who's, like, sort of an entrepreneur and helium filled. Wait. You know, but he was in helium, among other things. He's one of these guys that has his, like, fingers in everything. And he also had like a helium venture and he's like, oh, you got to talk to my friend one day, you guys should do an episode on helium. And then I got connected with our guests who are about to introduce in a second. And I said, hey, do you know this guy in the East Village? Because, okay, maybe, like, not everyone in Canada knows each other, but everyone in the helium industry almost certainly knows each other. He's like, oh, yeah, of course I know that guy, who used to live where it does. Seem to be a small, there's a small traded industry, which is why we're talking about it today. Which is why we're talking about today anyway. What is helium? Why is it important? Where do we get it? Why is it impaired right now? Many questions that people want answered. Very excited to say we do have the perfect guest. We're going to be speaking with Nick Schneider, founder and CEO of North American Helium, which mines and sells helium out of Canada. So, Nick, thank you so much for coming on Odd Lots.
Joe, Tracy, thanks for having me.
How annoyed are you that we brought a balloon just like, oh, I have the helium company. And like everyone, 99% of the time people are just going to think that's like the thing for balloons and therefore can't be that important.
You know, I've gotten used to it. I've got young kids and they had an exercise at school asking them what their parents did, and they said that I blow up balloons. So the teachers definitely think I'm a clown. And, you know, we all get used to it.
Okay, well, why don't we ask, in all seriousness, what are the industrial applications for helium beyond entertaining us in balloon form?
So the biggest demand source, which you've probably seen in the news a little bit because of the events in Iran, is manufacturing semiconductors. And beyond that, one of the fastest growing end uses is for launching rockets for space exploration. And then there's a number of pretty durable long-standing uses, including leak detection for everything from every cell in an electric battery to all sorts of complex machinery manufacturing, fiber optics, titanium, MRIs and NMR for building discovery. It's, you know, pretty well used across all of technology.
All right. So what is it about the element helium that gives it these properties such that it is useful? And you described a fairly wide range of industrial applications.
So what makes it so useful is it's got three or four things going for it that are completely unique. One is that it has the lowest boiling point of anything in nature. So liquid helium is about four degrees Kelvin. I don't have my, you know, conversion in front of me. I think that's, you know, minus 270-something degrees Celsius. So it's the coldest substance on Earth, and that's really important for any sort of superconducting magnets.
Google says that's minus 452 degrees Fahrenheit.
So yeah, that's quite cold. For a Canadian company, Kelvin is our common language. We don't have to fight Fahrenheit versus Celsius here. We're going to clasp hands with Kelvin anyway. Keep going. So just the boiling point alone makes it very unique and important. So if you want to have something very cold, and that's primarily low-temperature physics and superconductors, you need to use liquid helium for that. But the boiling point is also important for launching rockets because if you're launching rockets, you can't pump the liquid rocket fuel into the engine fast enough because the volume is so large. So you need to pressurize those rockets. And that is primarily done with helium because it is lightweight, but also it's the only substance that is non-reactive that remains a gas at the temperature of liquid oxygen or liquid kerosene.
Okay. And where does helium come from?
Well, we forgot about all the other important parts of what makes helium, you know?
Oh, you're a dud. Yeah. Sorry. Keep going. Yeah. All right.
So it also, in addition to being a very cold substance as a liquid, it's also a great heat transfer medium. So if you think about, you know, the fiberglass insulation in your walls is a good insulator, and the copper pot you cook eggs in is a good heat transfer medium. No one really thinks about that with gases. But helium is very good at transferring heat. So if you were a deep sea diver, they breathe a helium-oxygen mixture so that they don't get nitrogen narcosis when they're in that high helium atmosphere. They have to heat their habitat to about 98 degrees, and they'll start shivering because nitrogen is a very good insulator and helium is a very good conductor of heat. And that becomes important in semiconductor manufacturing because as they're doing the lithography process, they need a carrier gas that is a small molecule. And helium is the smallest molecule in nature. That's also something that can transfer heat away to avoid errors, and also is non-reactive. So really, what makes helium demand so durable in some of these applications is that you're using more than one of the unique attributes of the molecule.
Wait, just to be clear, on semiconductor lithography, the actual etching, how is the helium used in that process? Is it just like in the environment around to keep it cool, or like how is it being deployed?
So I'm not an expert here. I don't want to get out of my depth. But basically, you know, they have a light source and a mask, and then they have to deposit something on there that is vapor deposition. They need a carrier gas for whatever they're depositing on there, and they need that to be, you know, something with a very high heat transfer rate and also a small molecule. They use it in a bunch of other parts of the semiconductor process, but a lot of them like cooling the backside of the wafer. Right. You can't recycle it. It's the lithography process where they're essentially polluting the helium with, you know, other volatile compounds. That's what's causing demand to grow so quickly in semiconductors. And I've seen estimates that the new leading-edge chips use ten times more helium per chip than older technologies. So the helium demand from that sector is growing at roughly double the volume of silicon from that sector.
Okay. And I feel very afterschool special asking this next question while next to a balloon. But where does helium actually come from?
So helium is only created on Earth by, as you said, radioactive decay of uranium and thorium. Helium itself is not radioactive. And divers can breathe it as long as there's oxygen in there as well. What's interesting about helium is that unlike any other critical mineral, once you use it, it leaves the atmosphere, so you can't go get it out of a landfill after the fact. So that means that you can only find helium on Earth underground, where it's been trapped. And the generation time scales are roughly an order of magnitude larger than for oil and gas. So an oil and gas deposit might have taken 10 million years to be created, and in helium, you're talking about hundreds of millions of years because it's a very slow process.
And then what's its connection? So yours that we're going to get to, North American Helium and the deposits that you have access to. But there's helium deposits, and then helium also emerges as a byproduct of natural gas. So talk to us about how helium comes out of the ground, typically out of, you know, we're talking about the Middle East somewhere, Qatar, where there's a lot of gas versus, say, where you're mining here. And then we'll get into some of these different processes.
So that's really primarily a function of exploration. Okay. Helium is much more rare than natural gas. But most of the world's helium supply comes as a byproduct of natural gas, because there's been a huge amount of exploration drilling for natural gas. So that's where they found it. And there's one, you know, gigantic field in the US mid-continent called the Yucatan that's been on production for 100 years. That's what we used to originally fill the Federal Helium Reserve. The field in Qatar, which they share with Iran, although Iran is not able to extract helium that has 1/20 of 1% helium in it. So it's a very, very small quantity. But because they're doing so much pretreatment, because there's hydrogen sulfide in the gas, and because the scale of their LNG facility is so large, that's the largest single source of helium in the world.
This is really helpful because I just sort of, you know, when we do these things, like where does that come from? It's like all these byproducts. And so I assumed that helium was just like another byproduct thing that shows up anytime you're looking for natural gas. But it sounds like no, the reason it's there is just because there's been a lot of exploration in that area. And they found helium, but that it's not inevitable that anywhere you have natural gas, you're going to find helium.
So actually, on that note, so if I go exploring for natural gas and I happen to find a helium deposit, like what happens to that helium if I decide that I want to monetize it? Like how do I actually extract it out of the ground? How do I store it? Do I set up a helium facility right next to where the deposit actually is, or do I move it somewhere else? What's the next step in the process?
The way that the gas separation process works is, for the most part, you're actually separating everything except for the helium, because helium is a small, non-reactive molecule, you can't just take that out. So, for the most part, helium always shows up with nitrogen. So you'd already have a high nitrogen content in the gas, and then you're going to remove the nitrogen and the methane and be left with the helium, which you can then purify. And there's really only a couple of fields in the world. There's one field in Algeria that's been on production for a long time, and it's falling off. There's one field in Siberia. There's, you know, the field in the Middle East, the field that's been depleting for a long time, the US mid-continent, but it is really quite rare. And if you think about what are the ingredients you need for this, you need to have an area with uranium and thorium. And we sort of know where that is, because the US and the Russians during the Cold War looked all over the world for uranium. And you need to have an area where you've got a sedimentary basin where you're going to have traditional oil reservoir rocks, you're sort of looking for a sandstone. And in general, you're looking for an area where there aren't any mountains because it's a small molecule that wants to escape to the surface. So if you are in a tectonic area, that's going to be a big problem for you.
That's interesting. So the existence of mountains implies — I hadn't thought about that at all. I wouldn't say, oh, mountains, that's great. It's probably more deeply buried, less place for it to escape. But the existence of mountains implies tectonic activity. And that's how you get leaks. Super interesting. Do they have it in Kazakhstan? I know they have a lot of uranium there. Is there helium in Kazakhstan?
I think there's a little bit of helium content in one of the stranded gas fields there. I certainly there's no production there. Okay. And again, you know, the LNG operation in Qatar is somewhat unique with a very small helium content. If you were to go drill for helium in North America, and you're not going to have one of the world's largest LNG complexes, they're generally one third of 1%. It's sort of considered an economic cutoff for the helium content.
Is it true we used to have a strategic helium or a national helium reserve? I can't believe we don't have a strategic pork reserve. But there was a federal helium reserve.
Once upon a time when our government was very foresighted, we did build a helium reserve during the Cold War, which was a brilliant idea. Both because helium is an important thing to have, but also because that gas would have been vented otherwise. And, you know, a good example of this is in Algeria, they have one field with helium content that mixes in with everything else. If they're making LNG from the gas stream in Algeria, then they can recover the helium. But if they're putting it into the pipeline to Europe, which unfortunately is where the majority of it's going right now, because gas prices are very high in Europe, it can't be recovered. And that helium, when you turn on your stove, is just going to escape into the atmosphere.
Oh, that's really interesting. So even if you don't have a market or an easy way to sell it at the time, what the strategic reserve did was allow us to capture something that would have been otherwise lost permanently had we not had this thing. So tell us the story, because evidently we don't have it anymore. What was in it? Where was it, and where did it go? Who'd we sell it to? What happened?
So it was primarily the helium. That was the huge field, which is this very large field. It's across Texas and Oklahoma and parts of Kansas, close to Amarillo. So the field is very large. The gas production from that, we started recovering helium. We were always the, you know, sort of Saudi Arabia of helium, if you will. You know, side note there is that the Hindenburg was designed for helium, and the US Senate blocked export of helium for military reasons to Germany, and that's why they filled it up with hydrogen instead. So this has been going on for a while. And, you know, we talk about it being a small molecule and difficult to trap underground. A good example of that is when it was first found in Kansas. Originally, helium was discovered by looking at the sun during an eclipse, and someone was able to see from the spectral lines that there's another element out here, and then they found an inert gas well in Kansas, and they were able to, you know, distill the helium basically by putting the gas through a bunch of really narrow glass tubes. And the helium will go through the glass because it's such a small molecule. And that's how they were able to distill it. So anyways, we built the world's only helium reserve during the Cold War, and this is something that the science community was very excited about because they recognized that this is really important for a bunch of science and physics. But more importantly, if you think about the long term, we're living in interesting times in many ways. But an interesting time, if you think very long term in terms of the last hundred years, have seen drilling for natural gas all over the place, and particularly for conventional deposits, it's important to understand you can't find helium in economic quantities in unconventional resources like shale. So prior to our company, the last new discovery of helium that was commercialized in North America was 50 years ago. And gas companies aren't looking for these conventional fields anymore, but, you know, the American Physical Society got very upset when we talked about selling off the helium reserve. And they said, basically, this is a molecule that's only getting more important. We're finding more and more uses for it. And if you think about today, what are some future uses? They're using this for quantum computing to keep things very cold. They're using it for nuclear fusion for the superconducting magnets. They're now using it, and I think Xcel Energy just filed for an IPO. Those are helium-cooled silicon reactors that they're building assemblers. Because like if you think about Fukushima, that was a water-cooled reactor and the water got hot and then the water turned into steam, and it got so hot that the steam separated into hydrogen and oxygen, and then things blew up. But because helium is such a good heat transfer medium, you can use helium as the primary loop there in these reactors. And it makes it passably safe. So the physics community was very up in arms when we decided to sell this off because they said, you know what happens 50 years from now when we need this for space exploration and quantum computing and everything else? And there's no one drilling for conventional gas anymore. So, you know, that's sort of the issue there. And, you know, we can get into why we sold it off.
Well, who bought it? Where did it go? Because I can't imagine, like, we bought the strategic helium reserve. Let's just go make a bunch of balloons. Like, I assume that didn't happen. So who bought it and what did they do with it?
So we actually stockpiled two things during the Cold War: helium and tin. Tin is also used for semiconductors. We sold them both off prior to right now, when we started building semiconductor fabs in the US. That's sort of a, you know, not a great choice necessarily with regard to the helium reserve. When they originally started, they took the helium out of the gas stream. And to your point, Tracy, they put it into an old natural gas field in Amarillo. So that's why the helium reserve was there. And they filled that up. But the government never appropriated funds to pay for the helium. So the Bureau of Land Management or their predecessor basically owed the government $300 million for this because no funds were appropriated, and that $300 million was accruing interest to the point where, I think in 1996, Newt Gingrich got into power and it was time to start talking about privatizing things. And Christopher Cox went to the House floor and basically said, you know, do you know, the government is dumb, government has $1.4 billion of party balloon debt. And a bill was quickly passed and, you know, signed by Clinton. And we decided to sell the whole thing off. The original plan, I believe, was to sell it off in equal parts over 30 years for exactly 1.4 billion, with no regard to the market, just to pay off the government's so-called party balloon debt. And the physics community was up in arms about this. But, you know, they don't have that many senators.
I think that's amazing. And I feel like we could do a whole episode just on the helium reserve. But a serious question, I guess, or maybe a related question, how difficult is helium to store? Because we're used to, you know, maybe you go into the party balloon shop in the party balloon district of downtown New York, and you see canisters of helium gas lying there. But on the other hand, I imagine you're talking about the world's smallest molecule. As you said, it must escape quite easily. So if you decide to get into the party balloon business and you're going to take over where Party City left off, you know, by the way, the only time people usually, you know, friends on the street bring up helium with me is every time there's a helium shortage. And we're now looking at probably the fifth in the last 20 years. Party City goes bankrupt. That's a big event in the industry. But if you wanted to get into that industry and you wanted to get canisters of helium, and I hope, being an honest person, you would get canisters of pure helium, because I've heard a lot about people, you know, going 50/50 in your balloons, they don't stay in the air as long as you remember them when you were a kid.
The helium will be leaking around the threads of the valve. You know, a little bit each day. Yeah. And the world trade of helium is actually done in the form of a liquid, where a liquid helium ISO container can be put on a ship, it can hold roughly five times more than what used to be called a tube trailer. You know, sort of a two-foot-in-diameter, 40-foot-long tube. And you'll see these on the highway where there's about ten of them stacked on the back of a tractor trailer. That's a steel tube trailer. Now, because of the hydrogen industry, there is carbon fiber overwrap trailers that can hold about a third as much as a liquid helium container. So it changes the transportation differential a little bit. And that's what we use. But it's shipped around the world as a liquid, and as a liquid, it is perishable. So that's part of the reason that whenever, you know, this sort of a timeline here is — I have nothing interesting to say about geopolitics, but the Qataris said they were going to wait until hostilities ceased, and then they will restart LNG production. And I read that it'll take three or four weeks or something. The helium industry is going to take longer than that to recover from this, because there's only about 3,000 of these liquid helium containers in the world. They're highly, highly specialized because you're talking about taking a huge amount by weight of liquid helium, which is at four degrees Kelvin, and putting it in a container where it's essentially a very fancy thermos. But this has to be hearty enough that you can put it on a truck and put it on a ship. But it's warming up the whole time, and the very best containers can hold the helium for about 45 days before the pressure gets too high, and they'll essentially vent themselves. So it makes it very perishable, and it makes the containers very important.
I would assume that the Qatar LNG facilities had filled a lot of liquid helium containers that are now stuck somewhere. Yeah. And those are slowly warming up. And on the other hand, to deal with a crisis like this, the big industrial gas companies are now going to have to scramble to move containers to other sources to try and get helium out of storage, where they've built some private storage since the, you know, Federal Reserve is now essentially gone. And that's going to cause a lot of problems because it's just a very limited supply of these. I just wanted to say, and I really mean this with no offense, but any time that we have a guest who sort of is talking a lot about science and technology, I do a little bit of live fact-checking.
I like, look up all these things, and it's like, yep, we really did have something called the Helium Privatization Act in 2016.
Just about one. Party balloon.
Debt and party balloon debt.
It really is perceived to be important in quantum computing. It really is perceived to be important in small modular reactors.
