Name of the Project
Free State natural gas project.

Location
The project spans 187 000 ha of gasfields across Welkom, Virginia and Theunissen, in the Free State, South Africa.

Client
Tetra4, a subsidiary of Renergen.

Project Description
The project entails the construction of a 52 km pipeline network and associated gas-processing facilities.

The aim is to produce all South Africa’s helium and the first liquefied natural gas (LNG) locally available for commercial consumption.

Based on Renergen’s five-year production mark, it is feasible that the company can produce between 1 000 kg/d and 1 500 kg/d of helium, which could increase to about 5 000 kg/d of helium, should it have the possibility of tapping into the contingent reserves.

Additionally, Renergen will produce, concurrently, up to 10 000 GJ/d of LNG once reaching full production. This amount of energy is equivalent to 277 000 ℓ/d of diesel.

Potential Job Creation
Not stated.

Value
The total projected capital expenditure to roll out the first phase of production is about R400-million, which includes the liquefiers that will cost between $15-million and $20-million for Phase 1.

Duration
As a result of significant engineering, Tetra4 will start construction of natural gas liquefiers in early 2018, with production of LNG to start in the third quarter of 2019.

Latest Developments
Renergen has signed an offtake agreement with Anheuser-Busch InBev (AB InBev) a subsidiary South African Breweries (SAB) to supply LNG to power its delivery trucks.

The agreement will result in the initial roll-out of compressed natural gas to a small fleet of SAB trucks in the Gauteng area using gas from Renergen’s Tetra4 operations.

This will be expanded to a significantly larger fleet to run on LNG once Tetra4’s plant reaches operational status in 2019.

Further, owing to a “massive supply squeeze in the helium market”, Renergen CEO Stefano Marani explains that Renergen’s Tetra4 plant will not completely saturate global demand, which is currently at about seven-billion cubic feet a year. Global supply is currently at about six-billion cubic feet a year.

“Our Tetra4 plant’s reserve review estimates contingent helium reserves in the area to be up to 25-billion cubic feet, with the updated reserve review showing that the latest well drilled in the Virginia project contains a concentration of almost 11%, compared with the global average of 0.5%,” Marani adds, noting that this put’s Tetra4 in a “different league in the helium space”.

The production at this plant, he has noted, will mean that South Africa can locally procure LNG and helium, instead of importing them.

All excess amounts of helium will predominantly be exported, owing to the expected depletion in about 2020, of the US Bureau of Land Management’s (BLM’s) helium reserve, which is currently the largest supplier of helium globally.

Marani has highlighted that, to slow consumption, a US scientist has been pushing to have helium banned from being sold to the balloon market, as this will slow down consumption by about 5%. “It would make a small difference, but it would help.”

He has further warned that helium is nonrenewable and irreplaceable, owing to its unique properties, which are unlike hydrocarbon fuels (natural gas or oil) in that there are no biosynthetic ways to make an alternative to helium.

The depleting resource will impede technological advancements, unless an alternative metal, which can be turned into a super conductor without having to reach the same temperatures as helium, can be found.

Marani adds that currently demand outstrips supply. One of the key uses for helium is in the medical industry and China’s growing middle class now demands further access to western healthcare, placing further pressure on demand and making the helium discovery at Tetra4 in South Africa a globally significant one for the helium market.

Key Contracts and Suppliers
MHA Petroleum (helium reserve independent expert report).


On Budget and on Time?
Too early to state.

Contact Details for Project Information
Renergen, tel +27 10 045 6000, email info@renergen.co.za or investorrelations@renergen.co.za.