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Virginia gas project, South Africa – update

Image of Virginia gas project helium facility

18th March 2022

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 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 was expected to start producing LNG and liquid helium by the end of 2021; however, this has been delayed by Covid-19. The revised scheduled forecasts the startup of commercial operations in April 2022.

Phase 2 is expected to complete construction of both stages in 2025 or 2026.

Latest Developments
Ivanhoe Mines has invested R200.6-million ($13.3-million) in Renergen by buying more than 5.6-million Renergen shares at R35.625 a share.

The placement is within the company’s existing pre-approved placement capacity, and means that Ivanhoe will now acquire an initial strategic shareholding in Renergen and, subject to its evaluation of the company and the scalability of operations, may thereafter become a strategic partner and major shareholder in Renergen.

The conditional option provides for Ivanhoe to potentially invest up to $250-million in Renergen, with the funds to be used for up-scaling the Virginia gas project, following the imminent commissioning and start of Phase 1 commercial production.

Ivanhoe believes that Renergen’s development of the country’s first commercial LNG facility and proposed gas‑to‑power operations at the Virginia gas project through the Phase 2 development will impact favourably on national energy security, as well as Ivanhoe’s ability to source the power it will need for its Platreef project.

Moreover, power production at the Virginia gas project will have significantly lower greenhouse-gas emissions than the country’s existing, predominantly coal-generated, power supplies.

While the primary driver for Renergen entering into the transaction is to secure funding for the further development of the Virginia gas project, not all the cash available from Ivanhoe is required immediately.

The parties have, therefore, agreed that, as part of the strategic cooperation between them, Ivanhoe will have the option to settle the second subscription by issuing the investor shares, which further enhances the cooperation between the parties. 

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.

Edited by Creamer Media Reporter

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