Emerging gas producer Renergen is inviting proposals to generate as much as 100MW gas-fired power, enough to electrify 6,500 average households, after making a new find at its Virginia project.
The potential power project comes as SA’s monopoly power utility Eskom struggles to keep up with electricity demand and last week implemented stage 6 load-shedding, which forced some SA mines to halt production.
A 100MW supply could help power gold mines in the Free State.
The surprises keep coming for JSE- and ASX-listed Renergen, which bought what it first thought was a small natural gas project in the Free State known as Tetra4, aiming to develop a 1.4MW power project for a nearby mine.
However, the company soon discovered the gas also contained helium, which at 11% concentration is the world’s richest known helium resource.
Declared a strategic commodity by the US, the country’s Overseas Private Investment Corporation (Opic) in August committed to fund $40m (about R580m) to develop the first phase of the Virginia gas project.
Game-changer
Now, after drilling a horizontal well to access resources trapped beneath a large sandstone deposit, the company has announced that more gas has been struck at its Virginia site. Significantly, laboratory results show the gas composition is 12% helium and more than 75% methane. Though the quantity of gas is yet to be determined, when the well is fully closed it reaches about 12 bar of pressure.
“This has all the indications of a game-changer, and [is] significantly bigger and better than we originally thought,” says Renergen CEO Stefano Marani.
“Obviously a lot more testing is required to determine the size of the reservoir, but … this sandstone play has not been factored into any previous reports, so this is a new discovery for us. With a 12% helium concentration and these flow rates, this has the potential to become a globally significant helium resource and could make Renergen a significant helium supplier globally” he said.
Tetra4 had the first and only natural gas project to have been awarded an onshore petroleum production right in SA amid government delays in publishing policies that are hoped to kick-start the sector.
Own goal
Niall Kramer, executive director of the SA Oil and Gas Alliance, said Renergen’s high-value boutique-scale activity paired with the scale of Total’s significant Brulpadda gas find off the coast of Mossel Bay is helping shift government inertia in helping to unlock the nascent SA sector.
“With the president’s $100bn investment drive under way, this new industry could substantially contribute to that. The main barrier to that is a long-standing own goal in that the government has still not passed the new upstream petroleum bill.
“SA desperately needs a catalyst and we could now have a new catalyst like mining was for over 100 years. But we need to explore to confirm the hypothesis,” he said.
The new bill, which is expected to be published soon, could have a catapult effect on the economy by creating business and job opportunities if it is commercially attractive, Kramer said.
Renergen now plans to drill the well further “to estimate the extent of the accumulation and confirm its deliverability, which we expect to be completed in March 2020”, Marani said.
Renergen said it welcomes proposals from interested parties on gas-fired power solutions as well as from parties looking to receive power in the Free State.
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