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Virginia gas project, South Africa – update

Image of Virginia gas project at night

Photo by Renergen

5th April 2024

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, constructing additional gas-gathering pipelines and 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
Renergen has reached the final stages of its helium system integration, indicating significant progress in its operations, making South Africa one of only eight countries to produce liquid helium.

In a quarterly update issued on March 28, 2024, the company said the original-equipment manufacturer (OEM) supplier had arrived on site in late February to complete the last phase of commissioning for the plant. Renergen said progress was satisfactory, with no significant issues detected.

The nitrogen and helium cold boxes have been fully integrated into the system, and the helium storage tank has been cooled to 20 °K.

The company further reported that it had successfully processed its tail gas stream, which is the gas extracted directly from its wells, through the necessary modules. This process separates methane from the gas, resulting in concentrated helium of 99.95% purity.

These milestones align with the design specifications before the liquefaction stage.

Following this, the helium undergoes a final filtration process to achieve a purity level of 99.999%. The independent verification of these results has been conducted by a laboratory approved by the South African National Accreditation System.

Prechecks and assessments are being finalised by the OEM, and oil and gas subsidiary Tetra4, before proceeding to the next phase of commercial liquefaction for customers.

The liquification process was also subjected to full testing, and the company foresees no challenges in meeting the upcoming milestones.

Upon starting the liquefaction process, the liquid helium will further cool the storage tank to 4 °K, signalling the start of the final performance test to be conducted by the OEM supplier.

Renergen has also reported that Mahlako Gas Energy has fulfilled all the conditions precedent with regard to its investment in the Virginia gas project. The transaction involved the sale of a 5.5% stake in Tetra4 for R550-million.

Additionally, in its quarterly update, the company states that all scheduled and unscheduled maintenance of the plant was successfully conducted in February, and that it is actively exploring contractual- and insurance-related claims stemming from the root cause determination of the plant failure.

During February, 154 t of LNG was produced as the plant transitioned from a complete outage to operational status.

Renergen’s focus moving forward will be on ramping up production, increasing efficiency and enhancing reliability.

Further, Italian company Airsol, a wholly owned subsidiary of gas producer SOL, finalised its investment of $7-million into unsecured convertible debentures in Renergen. The debentures are set to convert into securities upon the completion of Renergen's initial public offering on the Nasdaq slated for later this year.

SOL’s experience in LNG is expected to complement Renergen's overall capabilities.

In terms of exploration, Renergen has re-evaluated legacy seismic data covering about 100 ha using advanced seismic attributes such as edge detection and ant-tracking.

The company has said this analysis has yielded valuable structural insights into gas migration at depth, as well as clear indications of significant gas accumulations across various time and depth slices. The updated geological model incorporates this information for future exploration targeting.

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 (EPC) 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 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 contract 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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