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Virginia gas project, South Africa – update

9th April 2021

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 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 obtained laboratory results on the helium concentrations from recently drilled wells P007 and MDR1, which has returned a helium concentration of 3.15%.

Wildcard well P007 returned a concentration of 4.38%.

Renergen said on March 29 that, since its March 11 announcement, the flow rate at MDR1 had increased by almost 90% to about 164 000 standard cubic feet a day, which is consistent with expectations, as lost circulation drilling fluids introduced into the borehole dissipate and dry out.

“MDR1 is just 300 m away from MDR5 and 600 m from HDR1, which are both blowers with helium concentrations of about 2%, so getting a concentration of 3.15% was a very pleasant surprise,” Marani has said.

“It will be interesting to see when and if the helium concentration reduces and stabilises in line with the nearby wells, but a key take-away from this excellent result is that, despite the wells being so close, there does not appear to be any immediate interference between the wells, which is a great result for our reserve update.”

The results are a “big leap” forward in corroborating Renergen’s geological modelling of the Virginia gas project, and the potential additional supply of more than 40 kg/d of helium from a single well "is quite an outstanding result", the company notes.

Meanwhile, Renergen has completed its fifth major milestone at the gas project as the company advances towards the start of production in 2021.

The milestone includes the shipment of various equipment from China to South Africa.

Key Contracts, Suppliers and Consultant
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, which was 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.

Edited by Creamer Media Reporter

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