Renergen’s shares have been up +43.14% on the Australian Securities Exchange (ASX) and +31.27% on the Johannesburg Stock Exchange (JSE) since Friday. The most significant jump happened today with an increase of almost +30% on the ASX and +15% on the JSE after the company reported a 600% increase in its 1P helium reserves in South Africa.
Source: Yahoo Finance
Renergen is South Africa’s only onshore petroleum production right holder and sits over a Production Right area of 187,000 ha in the Free State around the towns of Welkom, Virginia and Theunissen. This is where its subsidiary Tetra4 is developing methane and helium reserves to produce liquefied natural gas (LNG) and helium, mostly for the domestic market at first.
A 600% Jump in 1P Helium Reserves
Following the recent successful drilling campaign and as part of Renergen’s ongoing assessment and development of Virginia, the company had commissioned international Reserves and Resources accreditation agency Sproule to estimate its reserves and resources of methane and helium within the Virginia Production Right area as at September 1, 2021.
Sproule’s estimation resulted earlier today in an upgrade of both methane and helium reserves. 1P helium reserves have notably increased by an impressive 620% to 7.2Bcf while 1P methane reserves have increased by 427% to 215.1Bcf. As a result, 2P total gas, including methane plus helium, is now equivalent to 65 MMscfd for the remainder of the license tenor.
Phase 1 is Almost Complete
The development of Phase 1 at Virginia is already well underway and involves the connection of 12 existing gas wells to a new 52km gas pipeline and small-scale LNG and helium processing plant.
Renergen secured all the necessary funding for this first phase and held a groundbreaking ceremony at the end of 2019. Drilling is now ongoing, along with pipeline construction and the development of the gas plant, with a commissioning expected before the end of 2021 and start of helium production in Q1 2022.
Meanwhile, logistics and transport companies are expected to make a major part of future customers, and Renergen launched South Africa’s first LNG auction in July 2020 to allocate future LNG production. Strong interest for the auction confirmed the appetite of the South African market for cleaner and cheaper fuels.
In August 2021, Renergen also executed its first LNG supply agreement not linked to the transport sector: the 5-year contract was inked with Consol Gloss for about 14 tons per day of LNG and will start in January 2022. It carries a price which will be linked to the floating LPG price in South Africa.
Towards Phase 2
Phase 2 is expected to follow by 2024, further increasing LNG production to meet an anticipated increase in demand and provide LNG supplies across all major highways in South Africa. Key contracts for phase 2 were awarded in early 2021, including the FEED studies, and the final investment decision (FID) is expected to be taken once these are completed. Phase 2 is designed to allow Renergen to produce significantly larger quantities of LNG and liquid helium with a target of 44 MMscfd of gross gas sales made up of helium and methane.
Phase 2 is expected to require a CAPEX of $800m and involve a drilling campaign of 297 wells, anticipated to build up to 44 MMscfd at full production. 65% of Phase 2’s anticipated production is already pre-sold to clients including Linde, Meser, Helium 24 and iSi.
Details on the Virginia Gas Project are available in the “Projects” section within your Hawilti+ research terminal.