Alternative and renewable energy investment firm Renergen expects to become a significant global producer of helium when its Virginia project starts production in 2019.
This will also result in South Africa becoming the eighth country in the world to export helium.
Renergen last week released an updated independent reserve review for its Virginia project, a 187 000 ha area of gasfields spanning across Welkom, Virginia and Theunissen, in the Free State, which included quantified results of recoverable helium-4 resources, at 6.2-billion cubic feet on a discovered commercial basis.
The Virginia project had previously been valued at about R6.6-billion, according to consultancy Venmyn Deloitte’s valuation.
The updated review now values the project at R8.4-billion. Renergen CEO Stefano Marani points out that the increase is based on numerous factors, including increased helium reserves, a more favourable oil price and a more formal evaluation of the helium reserves.
The reserve review was undertaken as a result of a condition precedent in an agreement with Renergen’s credit facility provider, the Industrial Development Corporation, obligating Renergen to have an independent expert verify the resource. Renergen decided to combine the independent expert report, compiled by US petroleum specialists MHA Petroleum, with an updated report on the field, with a specific focus on assessing the helium in the reserve.
The independent reserve review estimates contingent helium reserves in the area to be up to 25-billion cubic feet. Helium is found within natural gas in concentrations typically up to 1% by volume of the gas released; however, the updated reserve review shows that the latest well drilled in the Virgina project contains a concentration of almost 11%.
Marani says this ensures the liquefied natural gas (LNG) production balances out with the helium production to ensure sufficient supply in relation to LNG demand in South Africa, unlike, for example, helium reserves in Qatar being 0.4% concentrated, meaning there is an oversupply of LNG along with it.
Marani tells Engineering News Online that the company’s prime focus is to finish up final studies at the Virginia project to finalise the amount of necessary capital expenditure, procure drilling equipment and services, build a reticulation network and go into production by the third quarter of 2019.
The total projected capital expenditure to roll out the first phase of production is about R400-million. To bring the Virgina project into full-scale production – including the production of LNG – will cost between $15-million and $20-million.
Renergen in May 2016 signed an offtake agreement and distribution rights for the helium with US-based leading gas and engineering company Linde Global Helium. Marani notes that soon all of South Africa’s helium and LNG will be produced locally, instead of being imported.
Further, all excess amounts of helium will predominantly be exported, owing to the anticipated depletion, in 2021, of the US Bureau of Land Management’s (BLM’s) helium reserve, which is currently the largest supplier of helium globally.
Marani says global helium demand, which is currently at about seven-billion cubic feet a year, exceeds supply of about six-billion cubic feet a year. “Once BLM goes off line, supply worldwide will most likely drop below five-billion cubic feet a year.”
He adds that, as it stands now, demand outstrips supply, and as one of the key uses for helium is in the medical industry and with China’s growing middle class now getting access to better healthcare, the demand pressures are compounding, making this helium discovery in South Africa a globally significant one for the helium market.
South Africa uses about 350 kg of helium a day, which is largely consumed by the medical industry for magnetic resonance imagining machines, fibre optics and electronics such as microchips, as well as in specialised welding applications.
Renergen COO Nick Mitchell explains that, based on Renergen’s five-year production mark, it is feasible that the company can produce between 1 000 kg and 1 500 kg of helium a day – which could increase to around 5 000 kg of helium a day once it taps into the contingent reserves.
Additionally, Renergen will produce, concurrently, 10 000 GJ of LNG a day. This amount of energy is equivalent to 45 000 ℓ of diesel a day, which will be ramped up to the equivalent of between 200 000 ℓ and 250 000 ℓ of diesel a day within their five-year production mark.
“Prior to the environmental authorisation being granted in September 2017, the company had spent around R150-million on exploration and construction of the first compression plant, which services transport operator Megabus,” notes Mitchell.
Moreover, in terms of challenges, Marani states Renergen has an established contracting methodology to reduce construction risk. “Fortunately, most of the equipment is plug-and-play and is containerised, so we can limit exposure in this regard.”
Additionally, the reticulation network to collect the gas is low pressure and made from plastic, so its installation is quite straightforward.
“Our final milestone is raising the equity, which we will approach the market for when we are satisfied that all the boxes have been checked,” he concludes.