Qatar closes helium plants amid rift with Arab powers (updated)

Air Water

13/06/2017 19:46

* Early sign of possible impact on global commodities 
markets 
    * Closed land crossing with Saudi Arabia has frozen exports 
    * Consumers tap inventory, search for new suppliers or 
routes 
 
 (Adds context, comments from industry participants) 
    By Stephen Kalin and Tom Finn 
    DUBAI/DOHA, June 13 (Reuters) - Qatar, the world's second 
largest helium producer, has closed its two helium production 
plants because of the economic boycott imposed by other Arab 
states, industry sources told Reuters on Tuesday. 
    The helium plants operated by RasGas, a subsidiary of 
state-owned Qatar Petroleum  QATPE.UL  (QP), were shut after 
Saudi Arabia closed its border with Qatar, blocking overland 
exports of the gas, a QP official told Reuters. RasGas is 70 
percent owned by QP and U.S. giant Exxon Mobil  XOM.N  has 30 
percent.  
    The official declined to be named under briefing rules. Phil 
Kornbluth, head of U.S.-based industry consultancy Kornbluth 
Helium Consulting, said his sources had confirmed the closure. 
    The closure of the plants is a sign of how the rift between 
Qatar and Arab powers could affect commodities markets. Saudi 
Arabia, the United Arab Emirates, Egypt and Bahrain cut 
diplomatic and transport ties last week, accusing Qatar of 
supporting terrorism, a charge Doha denies.  
    Qatar's exports of liquefied natural gas at Ras Laffan have 
been unaffected by the boycott. 
    The impact on the global helium market was expected to be 
delayed, as consumers use up existing stocks and work out 
alternative supply options. Shipping by sea directly from Doha 
or through Oman would add complexity, risk and cost. 
    But if the diplomatic dispute lasts a month or more, 
Kornbluth predicted there would be a global shortage and the 
last time that happened, prices doubled. 
    "Helium is the single commodity that is affected most by 
this blockade because it's probably the only thing where Qatar 
is a major world producer and the supply has been completely cut 
off," he said. 
    Among its uses, helium is used to cool superconducting 
magnets in medical magnetic resonance imaging (MRI) scanners, as 
a lifting gas in balloons and airships, as a gas to breathe in 
deep-sea diving and to keep satellite instruments cool. It is 
derived from natural gas during processing. 
    The two plants shut by Qatar have a combined annual 
production capacity of approximately 2 billion standard cubic 
feet of liquid helium and can meet about 25 percent of total 
world demand for the gas, according to RasGas' website. 
    Kornbluth said the helium plants had shut down after filling 
all available shipping containers and storage tanks. He forecast 
the closure was costing RasGas revenue. 
     
    FINDING NEW SUPPLIES 
    Helium, best known as a gas for filling party balloons and 
making the voice squeaky, is difficult to capture and store. The 
United States is the biggest producer in what is a $4.7 billion 
industry, according to Mordor Intelligence. 
    Demand for the gas, driven particularly by Asia's booming 
manufacturing industry, is on the rise. 
    U.S. reserves meanwhile are dwindling due to the lack of 
helium production from its oil and gas fields, and the country 
has already had to start importing helium from Qatar. Other 
helium-producing countries include Algeria, Russia, Canada and 
China, according to the U.S. Geological Survey. 
    A Dubai-based vendor servicing the local market said on 
Tuesday it had not received new shipments from Qatar since last 
week, forcing it to dip into its stocks. 
    Japan's Iwatani  8088.T , which supplies helium to China and 
Southeast Asia, said it had a month's supply in stock. A 
spokesman told Reuters it was considering exporting on ships 
from a Qatari port, or sourcing from the United States. 
    German industrial gases company Linde  LING.DE  said it was 
working on meeting customers' requirements via helium sources in 
Australia, Algeria and the United States. 
    Air Water  4088.T , which imports from Qatar and sells in 
Japan, has shifted its helium supply automatically to the United 
States, a spokesman said. 
    A source with direct knowledge of the matter said South 
Korea's importers, which source a third of their helium from 
Qatar, could suffer heavily. 
    "We might have an indirect impact if U.S. helium prices go 
up," the source said. 
 
 (Editing by David Clarke) 
 ((tom.finn@tr.com)) 
 
Keywords: GULF QATAR/HELIUM