Name of the Project
Virginia gas project.

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

Project Owner/s
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 produce the first liquefied natural gas (LNG) locally available for commercial consumption.

Phase 1 aims to produce 350 kg/d of helium. Output will be increased to up to 10 000 kg/d of helium in Phase 2, “arguably making it amongst the biggest helium projects on the planet", CEO Stefano Marani has said. This will result in 0.7-billion cubic feet (bcf), which over 19 years amounts to 13.87 bcf out of 344 bcf, or 4%, of the prospective resource.

Renergen is also in the construction phase of South Africa’s first commercial LNG plant.

Phase 1 of the project will produce about 50 t/d of LNG, which is about 75 000 ℓ /d of diesel equivalent. Phase 2 will potentially increase this to the LNG equivalent of about 300 000 ℓ/d of diesel.

Phase 2 allocations will likely result in the project’s transforming into a significant LNG production facility, placing the project more in line with global production capabilities.

Phase 2 is intended to be completed by late 2023, by which time more than 150 wells would have been added.

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

Capital Expenditure
The total projected capital expenditure to roll out the first phase of production is estimated at R750-million, which includes the cryogenic liquefiers.

Planned Start /End Date
Phase 1 of the Virginia project is expected to start producing LNG and liquid helium by 2021. Phase 2 is expected to complete construction in 2023 or 2024.

Latest Developments
Renergen has revised the drilling programme at its Virginia gas project.

The first well in the programme, using a percussion rig, was unable to reach the casing point at the base of the Karoo sedimentary section after the bottom hole assembly was irretrievably lost following a drill string rupture.

As the drilling was on a turnkey basis, and at no drilling cost to the company until the base Karoo is successfully penetrated, it was decided to abandon this well rather than attempt to retrieve the lost assembly.

Following the abandonment of this well, the company revised its drilling programme so that the future wells will entail drilling subvertically to the base of Karoo casing point, and then drilling out of the casing to intersect the target gas-bearing fault structures at increased inclination using a newly available rotary rig with directional drilling capabilities.

The company says it has been fortunate to source this fit-for-purpose rotary drilling rig, which is now being mobilised to site.

In a further positive development, the company notes that it has gained access to an early vertical exploration well from several years back, which is already cased to the base of Karoo and is in close proximity to the anticipated gas-bearing fault structure; this well will be the first location for deployment of the directional drilling rig.

Going forward, it is anticipated that the programme can be accelerated by using a separate rig to drill and case to the base of Karoo, and using the directional rig to drill through to the target faults.

The next series of locations have already been identified by the company, which will accelerate the exploration drilling from the original programme.

“It is unfortunate that the drilling rod broke, but unfortunately accidents happen beyond anyone’s control. The silver lining is that it resulted in us gaining access to a fit-for-purpose directional drilling rig, which means we will be able to drill with far greater confidence and speed.

"Where we were drilling one before, now we have multiple targets being drilled concurrently, and in some highly prospective areas where indications of gas are strong, and no exploration drilling has been undertaken to date.

"This is a very exciting time for us on the exploration front, with fortune allowing us to turn a negative situation into one that could leapfrog our progress,” CEO Stefano Marani has said.

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

EPCM Bonisana (gas gathering work), a subsidiary of EPCM Holdings (EPC contractor).

Western Shell Cryogenic Equipment (technology and equipment), and Bohrmeister Technik (Phase 1 – drilling contract).

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