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Free State natural gas project, South Africa

28th September 2018

By: Sheila Barradas

Creamer Media Research Coordinator & Senior Deputy Editor

     

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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 gas gathering pipeline and cryogenic liquefaction processing facilities.

The aim is to produce all South Africa’s helium requirements and potentially export the balance of production, as well as 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, should it have the possibility of tapping into the contingent reserves.

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

Potential Job Creation
Despite the project’s size relative to traditional mining operations, it will create an estimated 360 temporary jobs over the period of development and construction, and an estimated 82 permanent jobs once all the clusters have been developed.


Value
The total projected capital expenditure to roll out the first phase of production is about R450-million, which includes the cryogenic 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 late 2018/early 2019. It is envisaged that liquefier construction will take about 18 months, but until this construction starts this timeline cannot be finalised.

Latest Developments
Renergen has signed an offtake agreement with Anheuser-Busch InBev (AB InBev) and 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 Gauteng 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.

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 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 these gases.

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 advocating that helium be 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).

Key Contracts and Suppliers
MHA Petroleum (helium reserve independent expert report) and VGI (owner’s engineer with regard to the engineering and procurement phase of the project).

Gas gathering work: The company has embarked on an expression of interest (EOI) for the construction of its gas gathering work. The purpose of the EOI is to gauge the appetite and support for the project to prepare a shortlist of suitably qualified construction companies to execute the work on a full turnkey engineering, procurement and construction (EPC) basis. The next step involves issuing a request for proposal and a final adjudication could be forthcoming before the end of 2018.

Gas processing facilities: The company has embarked on a technical and commercial exercise with five suitably qualified companies. Following a review by our internal and external engineering teams, a final comprehensive request for proposal has now been issued to the remaining three bidders. The project will be executed on a full EPC turnkey basis and a final adjudication could be forthcoming before the end of 2018.

 
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.

Edited by Creamer Media Reporter

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