Emerging helium and natural gas group Renergen has signed its second and final industrial liquified natural gas (LNG) contract for phase one of its Virginia gas project with bathroom-wear group Italtile.
Under the five-year agreement Renergen will supply up to 800GJ of LNG per day to Italtile’s manufacturing subsidiary, up to 30% of expected production from the first phase of the project.
One gigajoule (GJ) of LNG is equivalent to 20kg, or, in energy terms, 27.7 litres of diesel.
The contract includes a five-year renewal period at Italtile’s discretion. Italtile is SA’s biggest seller of tiles and its subsidiary, Ceramic Industries, is the biggest manufacturer with eight factories and 11 quarries as of 2021.
JSE- and ASX-listed Renergen holds SA’s only onshore petroleum development right, the Virginia Gas Project in the Free State, which has some of the highest concentrations of helium recorded in the world.
The contract is the group’s final for phase one, with the rest of the LNG earmarked for trucking, said CEO Stefano Marani.
Phase 1 was initially expected to be ready by the end of 2021 but was delayed by Covid-19. A further delay due to global shipping constraints has now pushed the project back by another month into April, said Marani, but Renergen is benefiting from a tightening global supply outlook for helium.
This includes a delay in a major development project in Qatar until 2025, while in Russia, Gazprom’s Amur facility suffered yet another fire in January that is likely to set back production for several months.
“We’ve had some enormous headwinds and there are major global supply issues,” Marani said.
Phase 1 is on track to begin production in April 2022, with an expected output of 2,700GJ of LNG a day and 350kg of helium, while the group is also gearing up for phase 2 of its development, a more substantial project that is expected to produce at least 24,000GJ.
Renergen is confident about the potential for significant growth in LNG in SA since it is a less carbon-intensive substitute for existing transport fuel and thermal fuel.
Helium is important for the medical industry and is used for cooling in magnetic resonance imaging (MRI) machines. It is also needed to make fibreoptic cables, cooling during the production of nuclear power, and the propulsion of rockets into space. It is a key input for the defence industry as well as for lighter-than-air recreational toys and vehicles.
In afternoon trade on Thursday, Renergen’s shares were up 2.13% to R38.80, having risen 14.45% so far in 2022 and more than doubled over the past six months.
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