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, South Africa.

Project Owner/s
Tetra4, a subsidiary of domestic natural gas and helium producer Renergen.

Project Description
The project entails the construction of 52 km of 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 across both stages of Phase 2, “arguably making it among the biggest helium projects on the planet", CEO Stefano Marani has said. This will deliver 0.7-billion cubic feet (bcf) of gas, which, over 19 years, amounts to 13.87 bcf, or 4%, of the 344 bcf 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. Both stages of Phase 2 will potentially increase this to the LNG equivalent of about 600 000 ℓ/d of diesel, subject to what current studies show geologically.

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 small-scale production capabilities.

Phase 2 is intended to have the first stage completed by late 2023 and the second stage by 2025, by which time more than 300 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 of both stages in 2025 or 2026.

Latest Developments
Renergen has signed multiple conditional helium sales agreements from its planned Phase 2 plant at the Virginia gas project.

Following the company’s maiden sales agreement in April for Phase 2 helium, Renergen has further secured three take-or-pay agreements for the supply of helium for 10 to 15 years with Linde, Messer and Helium24.

Linde and Messer have 15-year agreements with the company, while Helium24 has signed on for ten years.

Renergen confirmed on August 4 that these sales agreements, along with the iSi agreement in April, account for a combined 220 containers a year, which represents 65% of design capacity contemplated in the front-end engineering and design (FEED) of the Phase 2 project.

All contracts are based on a fixed dollar/million-cubic-feet price, escalating on every anniversary at the US Consumer Price Index, which will start from the date of first production, expected to start in the fourth quarter of 2023.

The cumulative volume of helium to be supplied under the contracts is 196 containers a year.

The agreements are conditional upon completion of several project development milestones at the Virginia gas project, including the completion of an engineering, procurement and construction (EPC) contract by the appointed EPC contractor with regard to Phase 2 at the project. Either party may terminate, owing to a delay in the start of the expected production date.

Should the company be unable to deliver at least 80% of yearly take-or-pay quantities during any consecutive six-month period once the plant is operational, the parties may terminate the contract.

Commenting on this major Phase 2 milestone, Renergen CEO Stefano Marani has said that adding these prestigious names to its customer list for Phase 2 production is “an incredible achievement and a testament to what the team is building at Virginia . . . Importantly, having long-term offtake agreements in place with tier-one customers provides a strong foundation for the company when we enter discussions with lenders to approve project funding, as it eliminates a significant component of market risk”.

Key Contracts, Suppliers and Consultants
Phase 1:
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 (engineering, procurement and construction contractor – Phase 1 gas gathering pipeline).

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

Phase 2:
Saipem (front-end engineering design (FEED) contract for the development of the downstream LNG and liquid helium processing facilities, including the associated balance of the plant).

EPCM Holdings (FEED contract – Phase 2 gas gathering pipeline).

Sproule (evaluation and certification of reserves, based on the results of the additional data acquisition and the current drilling campaign. This will build on previous work carried out by MHA Petroleum Consultants, acquired by Sproule in 2019).

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