$60 per mcf tells the story

Helium a New Target in New Mexico

It could shape up as an important gas play in New Mexico.

But if you’re thinking “natural gas,” think again. 

This time the gas is helium, which can be found in high concentrations with the state’s natural gas production.

Several areas of New Mexico appear prospective for high-concentration helium, according to AAPG member Ron Broadhead, principal senior petroleum geologist for the state Bureau of Geology and Mineral Resources in Soccoro, N.M.

And there couldn’t be a better time for helium development: The United States Strategic Helium Reserve, near Amarillo, Texas, will be depleted in the not-too-distant future.

Other countries with helium-production capacity have stumbled in attempts to increase the world supply. That’s produced a shortage of and much higher price for helium, to the consternation of research labs and university physics programs.

And, as the media almost always points out, it’s getting expensive to fill those party balloons.

Recently, crude helium has sold for more than $60/Mcf.

“Helium is one of the unsung heroes of the natural gas industry,” Broadhead noted.

“It’s one of those things if you don’t have it, you go back 50 years in time.”

Discovered on Earth in 1895, helium was a laboratory curiosity. The detection of helium in natural gas at Dexter, Kan., in 1905 was followed in the next three decades by many discoveries of small to giant gas fields in Kansas and the Panhandle regions of Oklahoma and Texas that held helium concentrations between 0.5 percent and 2 percent. Some contained upwards of 7 percent helium.

Later, helium-rich oil and gas fields were discovered in Colorado, New Mexico, Arizona and Wyoming, with some holding as much as 10 percent helium.

Helium has been produced in commercial quantities at few other sites around the world. Although Canada, Russia, Poland and Algeria have produced helium in commercial quantities, none have discovered reserves or helium concentrations comparable to those found in the United States.

Consequently, the United States has been the world’s principal source of helium for over 80 years.

Going, Going …

Wheeler Sears is president of Inter-American Corp. in Dallas. He puts together New Mexico exploration projects, watches industry activity in the state and avidly follows developments in the helium markets.

And Sears believes the New Mexico region will become a major helium-producing resource.

“It is going to be the helium resource for the world, because the uranium component in the formations out there is so high, and helium is a direct result of radioactive decay,” he said.

Helium can be found in two isotopic forms, helium-4 and helium-3. Helium-4 comes from radiogenic decay of heavier elements. The rarer helium-3 is mainly primordial and from Earth’s mantle.

The element can appear almost anywhere. It’s often a component of natural gas, but typically in a minute percentage. That makes New Mexico’s most promising production especially attractive. 

“The Department of the Interior says anything over three-tenths of 1 percent is high. We’ve done soil gas tests out there and think we are probably going to get up to the neighborhood of 3.5 to 4 percent, and high-Btu (natural) gas,” Sears said.

According to Broadhead, Devonian through Permian strata already have yielded almost a billion cubic feet of helium in the Four Corners area of New Mexico, but those fields are largely depleted.

Helium production also has declined from established fields in Kansas, Texas and Oklahoma, with the resulting shortfall made up by withdrawing helium from storage.

In the 1920s, the United States established its strategic helium reserve to provide gas for airships, primarily for military purposes.

Armed-blimp warfare turned out to be a little less important than expected for national defense, but rockets proved vital. Helium was used to produce liquid hydrogen-oxygen rocket fuel, so the federal government arranged for separation plants to generate helium for storage at the Cliffside gas field in the Texas Panhandle.

Critics of the reserve called it expensive and unnecessary, and said it forced the government to pay higher-than-market prices for helium.

In 1996, Congress voted to start selling off its stored helium on the open market, pending a study by the National Academy of Sciences. The government ultimately decided to deplete the reserve for commercial purposes by 2015.

“At the present rate of withdrawal, it’s going to be gone much sooner than that,” Sears said.

The Challenge

Although helium can be present to some measurable degree in natural gas, especially in the western United States, it usually goes unnoticed, according to Sears.

“It’s generally not tested for,” he said. “Most of the folks who have chromatographs purge them of helium to clean them up and don’t have the ability to test for helium.”

“A lot of helium is going down the pipe right now because people are not aware of the economic value of it,” he added.

If helium can be found and produced in economically attractive quantity, a separation plant probably will be built near production. Sears said helium can be extracted by cryogenic separation or pressure-swing adsorption.

Production could be the biggest challenge, even if good reserves of helium and natural gas are identified.

Some of the bad news about New Mexico exploration is summed up in two words:

Petroleum geology. 

The state presents a combination of balky producing zones and a tectonic mish-mash of faulted formations that can set petroleum geologists off screaming.

“You get it all out here, there’s no question about it,” said AAPG member Roy Johnson, a geologist and industry consultant in Santa Fe.

“A lot of the frontier work, I won’t say it’s been misunderstood, but people haven’t been able to put all the pieces together,” he observed.

Johnson said he spent many years with the state’s oil conservation division, where he saw the results of wells being completed and treated.

“Basically, what I’ve sat there and looked at over the years was the results of completion tests,” Johnson said.   

“People bring in the technology they’ve used in the Permian Basin. They say, ‘If it works there it should work over here.’ I’ve seen more wells screwed up,” he added.

The biggest problem, according to Johnson, comes from operators attempting to acidize their wells.

Another issue, he said, has been “petrology issues in the reservoir rock – being able to obtain sidewall cores or anything like that to let the producers know how to complete these wells.”

‘Promising’ Geology

Interest in the state’s helium-producing possibilities centers on the Chupadera Mesa area near Socorro.

New Mexico geologist Ben Donegan, another AAPG member, is credited with developing that play.

He drills with operator partners, currently Chaparral Energy Inc. in Oklahoma City.

“It’s public knowledge that we had significant shows of helium,” Donegan said.

The biggest player now active in New Mexico by far would be Shell, through its Shell Western E&P subsidiary. The company has conducted extensive testing of an 11,500-foot well in Guadalupe County, New Mexico, in the Tucumcari Basin.

Rumors have circulated in New Mexico that Shell’s AFE for perforating and testing exceeded $3 million, and that the well has good Lower Pennsylvanian pay.

Johnson assisted on a statewide petroleum source-rock project that evaluated Paleozoic-Mesozoic source units.

“Source rock is not a problem in New Mexico. The only basin more promising than the Tucumcari Basin, believe it or not, was the southern San Juan Basin,” Johnson said.   

“The southern San Juan has a unique characteristic which is a line in the sand, apparently, where if you use acid you just gum up your well,” he observed.

Analysis by Broadhead of the Tucumcari and other basins in New Mexico indicates the presence of elevator sub-basins – long, narrow and structurally deep troughs bounded by high-angle faults.

Early Pennsylvanian to Early Permian bounding faults have vertical offsets that can exceed 5,000 feet, Broadhead found.

“It is really interesting and very promising,” Sears noted.

“The tectonics out there are just absolutely fascinating,” he said. “They have these strike-slip faults that have bends or turns in them that create these pull-apart basins.”

Thickness of the Pennsylvanian – about 1,000-2,000 feet on-shelf – can increase dramatically in the deepest areas. Sears speculated it could approach 8,000-9000 feet.

“No one has drilled the total depths of the deepest part of these grabens,” Sears said.

“They are strike-slip based,” he observed. “They are grabens, but they are not what you’d consider to be the classic type of graben.”

Operators looking for typical traps and closure in New Mexico haven’t done as well as explorers attuned to the regional tectonics, according to Sears.

“The good production out there so far appears to be associated with these tectonic events,” he said.

“The footwall side of these faults is very steep,” he continued. “The hanging wall side has buckles in it. That’s what you look for as a trap – they call them ‘flowers.’ They’re not horst blocks, but they’re the equivalent of a horst block.”

Despite the challenges, natural gas already has renewed the exploration industry’s interest in New Mexico.

Helium might just give it another lift.

The Chupadera region near Socorro, N.M.; it may not look like much now, but its potential for helium production could make this site a lot more attractive.

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