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 through the construction of Phase 2 expected around 2023/24, “arguably making it among the biggest helium projects on the planet", CEO Stefano Marani has said. This will deliver more than 0.4-billion cubic feet (bcf) of helium, which, over 19 years, amounts to 7.6 bcf, or 2.2%, 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- to medium-scale production capabilities.

Phase 2 is intended to have the first stage completed by 2023/24.

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 R1-billion, 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 year end 2021. Phase 2 is expected to complete construction of both stages in 2025 or 2026.

Latest Developments
Renergen has signed a helium forward sale agreement with helium trading company Argonon Helium US for 100 000 units over 19 years, with each unit representing a thousand standard cubic feet (mcf) of helium at 99.999% purity and in liquid form.

Argonon will take possession of the units once they are paid for, and for which Argonon is under no obligation to buy, Renergen has said.

Argonon intends to use the units to establish a spot market for helium.

Following the forward sale of the first 100 000 units of helium, it is intended that any future sales between Renergen and Argonon will be priced according to the spot market of helium, less Argonon’s trading margin, and will be available to Argonon until the expiry of the Virginia gas project’s licence in September 2042.

The arrangement is intended to facilitate the creation of a liquid spot market for helium, which will be accessible to all investors through the Argonon platform. A portion of the funds from the presale will be used to accelerate Phase 2 without the need for equity.

The contract represents significantly less than 0.1% of global helium consumption over contract term and is, according to Renergen, intended to establish a mechanism for the company to sell helium to Argonon in the spot market when the Phase 2 plant becomes operational.

Financial services and technology company Purple Group has been appointed to create the digital platform to track and manage the units as they are exchanged and traded.

Further, the collaboration between Renergen and Argonon is specifically designed to bring transparency of pricing into the helium market and highlight the growing global importance of helium.

Marani has commented that “Argonon has developed an innovative product, which will provide an accessible platform and market for any interested helium investor to gain direct exposure in the underlying commodity, and marks its entry into a tradeable commodity”.

Through the development of its Virginia gas project, Renergen believes that it is in a strong position to supply this growing market and continue to create long-term value for all its stakeholders.

The agreement is subject to the parties’ having received any approval or consent, if and to the extent required under any applicable law to implement the transactions contemplated in the agreement.

Termination events of the agreement are based on standard provisions, which include only force majeure, breach or failure to perform.

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).

Phase 2:
Saipem (front-end engineering design, or 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.