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.

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.

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 option 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.

Should production be maintained, the production right has a remaining life span of about 23 years.

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 about R550-million, which includes the cryogenic liquefiers.

Planned Start /End Date
Construction is expected to start in the second half of 2019. The project is expected to reach commercial production by early 2021.

Latest Developments
Renergen has redeemed A$500 000 of convertible notes issued in December 2018. The notes had an interest rate of 15% a year and were convertible into shares at an equivalent price of A$0.074 a share.

“Redemption of the notes is a positive development for Renergen. It improves the company’s capital structure by reducing expensive debt from the balance sheet, and limits the potential for existing shareholders to be diluted at a price per share far below the current share price,” CEO Stefano Marani has said.

Meanwhile, Renergen has appointed Bohrmeister Technik as drilling contractor to undertake the drilling of a horizontal well in the prospective sandstone contained within its Virginia gas project’s production area.

Site mobilisation is expected to take place within two weeks, followed by a drilling campaign, which is expected to continue for the rest of the calendar year.

The horizontal well will provide the requisite information to allow for estimation of the scale of helium reserves contained within the sandstone, which have not been factored into existing reserve estimates.

The previous well drilled into the sandstone in 2016 had helium concentrations of almost 11%.

Over the past six months, Renergen has been working closely with its geological consultants, Shango Solutions, to optimise the information captured.

Renergen has, within the production area, identified a discrete sandstone body of varying quality, which is up to 100 m thick in certain parts, over at least 90 km².

Below the sandstone are interpreted north–south-oriented, steeply dipping fractures, and east–west oriented dykes associated with fractured margins. These structures have been identified as being potentially gas-bearing conduits with a higher helium concentration than the rest of the field, where the helium concentration exceeds 3%, on average.

The geological model developed over the past six months forms the basis of Renergen’s drilling strategy for 2020, which includes additional inclined wells to intersect known fault structures in the current production area, and will serve to feed Phase I of the project, with planned daily production of 2 700 GJ of LNG and 350 kg of helium from 2021.

The horizontal well, if successful, will form the basis for the startup of Phase II, which is expected to result in production levels of several multiples, compared with Phase I.

Key Contracts and Suppliers
MHA Petroleum (helium reserve independent expert report); VGI (owner’s engineer with regard to the engineering and procurement phase of the project); Bohrmeister Technik (drilling contractor); and Shango Solutions (geological consultants).

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

Gas-processing facilities: the company has embarked on a technical and commercial exercise, which includes a detailed request for proposals, and is evaluating and clarifying this with the bidders. The gas-processing facility may be executed on an EPC management basis.

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.