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 export the balance of production, as well as the first liquefied natural gas (LNG) for commercial consumption.

Phase 1 aims to produce 350 kg/d of helium. Output will be increased through the construction of Phase 2, expected in 2025, “arguably making it among the biggest helium projects on the planet", Renergen 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 just over half of its estimated proven and probable reserves.

Phase 1 of the project will produce about 50 t/d of LNG, which is about 75 000 ℓ/d of diesel equivalent.

Phase 2 of the Virginia gas project will produce 34 000 GJ of LNG and up to 5 000 kg/d of helium.

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.

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 160 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 started commercial operation at the beginning of September 2022.

The first stage of Phase 2 is expected to complete construction in 2025 or 2026.

Latest Developments
Renergen has said its Virginia gas project could generate an estimated R5.7-billion to R6.2-billion in earnings before interest, taxes, depreciation and amortisation (Ebitda) once the Phase 1 and 2 plants are in full production.

Renergen announced in January that it had successfully produced LNG and liquid helium from the Phase 1 pilot plant. Phase 2 will result in the construction of a significantly larger plant.

Upon completion, the company expects that the Virginia project will deliver a substantial amount of energy to the South African economy while transforming the country into one of the world’s biggest helium-exporting countries.

In determining the Ebitda estimate, Renergen has considered the potential production capacity of Phase 1 and 2, current favourable high energy prices, the current demand environment, a weaker rand relative to the dollar and other macroeconomic indicators.

The Ebitda estimate is expected to be reached in the financial year after construction has been completed, but is unlikely to be before full-year 2027.

Renergen has indicated that its Ebitda estimate relies on the assumptions that Phase 2 is fully funded and successfully built; that the rand:dollar long-term depreciation is in line with the respective jurisdictional interest rate differentials; that the liquid helium long-term spot price is about $600/mcf; and a long-term base LNG price of about R250/GJ.

Further, such assumptions do not take into account the costs of distribution, storage and dispensing, the company has noted.

In line with previous announcements, the company intends to reach financial close on several sources of funding.

A final investment decision on Phase 2 is expected to be made in the second half of this year. Shortly thereafter, Phase 2 is expected to achieve debt financing approval of up to $500-million from the US International Development Finance Corporation, and up to $250-million from a mandated global bank, the anticipated point at which the lenders are fully committed to financing the debt.

Key Contracts, Suppliers and Consultants
Phase 1:
Sproule, formerly MHA Petroleum (helium reserve independent expert report); and VGI (owner’s engineer regarding 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); Babcock (DAF CF 430 trucks); and Volvo (FM440 trucks).

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 undertaken 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.