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Virginia gas project, South Africa

20th December 2019

By: Sheila Barradas

Creamer Media Research Coordinator & Senior Deputy Editor

     

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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 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 and ramp up to 1.2 t/d and 5 t/d of helium in Phase 2.

Additionally, Renergen will concurrently produce 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 estimated at R500-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 start construction in 2022 or 2023.

Latest Developments
Drilling at Renergen’s Virginia project has progressed through the Karoo Supergroup and successfully intersected gas-charged sandstones and fractures, as was previously expected, the company has reported.

The gas was intersected under pressure on the morning of December 9, after the company drilled about 50 m into the sandstone.

The team on site has been flaring the gas for initial flow testing, which is showing flow rates of up to 850 000 standard cubic feet daily, with the valves partially closed to keep conditions on site safe.

When fully closed, the well reaches around 12 bar of pressure. More crucially, however, is that the gas composition is now 12% helium, with methane of more than 75%, according to the laboratory results. The global average of helium concentrate is about 0.5%.

On current plans, the well will be drilled into the sandstone for a further 1.2 km horizontally in January to maximise the productive reservoir intersection, which should, in turn, maximise flow potential, the company has stated.

The reservoir size and deliverability will ultimately determine the extent of any reserve, which will, in turn, determine the size of Phase 2 of the Virginia project.

Commenting on the early drilling success, CEO Stefano Marani said the project “has all the indications of a game changer”, and enthuses that the project is now “significantly bigger and better” than the company originally thought.

While more testing is required to determine the size of the reservoir, he has warned that it is key to understand that this sandstone play has not been factored into any previous reports, meaning it is practically a new discovery for the company.

Marani adds that with a 12% helium concentration and these flow rates, the drill site has the potential to become a globally significant helium resource and could make Renergen "a significant helium supplier globally".

This well sets a strong foundation as Renergen considers the size of Phase 2 of the Virginia gas project.

The equipment limited initial flow rates from the very limited section of sandstone so far drilled in this find could progress Renergen into potential domestic power production capability, potentially as high as 100 MW.

As a result, Renergen has said it will welcome proposals from interested parties on gas-fired power solutions, as well as from parties looking to receive power in the Free State. 

“We will focus on completing the well and flow testing in order to estimate the extent of the accumulation and confirm its deliverability, which we expect to be completed in March 2020,” Marani has said.

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

Western Shell Cryogenic Equipment (contract to supply the technology and equipment for the plant).

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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