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Virginia gas project, South Africa – update

Image of Virginia gas project

Photo by Renergen

21st April 2023

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

Phase 1 aims to produce up to 350 kg/d of helium. Output will be increased through the construction of Phase 2, expected in 2026, “arguably making it amongst the bigger 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 project will entail drilling additional gas wells, construction of additional gas gathering pipelines and the construction of a larger processing and liquefaction facility, as well as the associated road tanker distribution and downstream customer dispensing facilities.

In this phase production output will increase by 34 400 GJ/d of LNG and 4 200 kg/d of liquid helium in addition to the Phase 1 operation.

Potential Job Creation
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. Although this is small relative to mining operations, energy is typically a catalyst and has the effect of creating significant knock-on opportunities by offering clean, reliable energy.

Capital Expenditure
The total Phase 1 projected capital expenditure to roll out the first phase of production was about R1-billion, which included the cryogenic liquefiers. Phase 2 is estimated at $1.16-billion.

Planned Start/End Date
Phase 2 of the Virginia project is expected to start construction in 2023, and is expected to be ready to start operations in 2026.

Latest Developments
In January this year Renergen struck a new gas strike named Jabba. The well is producing at 1.6% helium.

Five successful wells within 100 m of each other have now been drilled, with no indication that the wells are communicating, the company reports in its quarterly update released in March.

Renergen notes that as it continues to produce gas from these wells, it might be able to use this data to increase the size of the reserves, assuming the wells continue to flow without communication.

Meanwhile, the construction and commissioning of the gas gathering pipeline is complete and in operation. As the drilling of the remaining wells for Phase 1 starts, the new wells will be tied in and connected to the gas gathering pipeline and compressor stations.

In parallel to the Phase 1 project, Renergen is advancing the proposed Phase 2 expansion of the Virginia gas project. To date it has completed the prefeasibility and feasibility studies, and the front-end engineering design (FEED) for Phase 2.

Further, it is completing due diligence and funding process advancement with the United States Development Finance Corporation and Standard Bank South Africa for a combined $750-million and preparing for credit submissions. Renergen has also secured several helium offtake agreements with several top-tier global industrial gas companies and end users.

Several expressions of interest for future LNG supply have also been received.

Renergen has also submitted the environmental- and social-impact assessment to the regulatory authority for appraisal and consideration having concluded the mandatory public consultation processes.

With regard to production, Renergen has experienced disruptions in production, associated with a new LNG/LHE processing plant.

The utilities section of the plant, including the conduction oil system, was previously reported as having significant difficulties and resulted in a shutdown of the facility in late 2022. Since the system has been reinstalled, it has been operating within specification and according to design parameters.

Production has increased significantly, and Renergen expects this increasing production trend to continue until full production capacity is reached. Most importantly, the company says, is to achieve stability and then optimise production output. Stability is achieved by reducing the number of interruption faults, the frequency of these faults and the duration thereof.

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).

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).

Worley RSA (scope of owners engineer role to execute the expansion of the Virginia gas project).

The company is tendering the EPC construction to experienced helium and LNG equipment suppliers, based on the FEED.

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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