Stefano Marani, CEO of emerging natural gas and helium producer Renergen, spoke to Africa Oil & Power about the company’s goal to supply up to 12% to 15% of the world’s helium from its Virginia gas project located in South Africa’s Free State province. Renergen plans to achieve this through an LNG auction where interested parties are invited to apply to bid for the allocation of LNG in the Virginia gas project.
Please introduce Renergen’s concept and the idea behind the auction?
Renergen is an emerging helium and natural gas producer and we hold the first and only onshore petroleum production rights in South Africa. We have proven reserves in the Free State province which has the highest concentration of helium in the world. We are in the process of starting the construction of the first phase of the Virginia Gas Project, our pilot project, which will come online in 2021. The first phase of this project will see us distribute liquefied natural gas (LNG) to filling stations with oil supermajor Total on the N3 highway, a major highway that joins Johannesburg and Durban.
We are also currently in planning of the second phase of the project – which will be a much bigger version of what we are currently building – to come online in 2023. The idea behind the auction was for us to quickly ascertain how much additional surplus LNG we should introduce into our planning to help meet some of South Africa’s LNG needs beyond what we are allocating towards the trucking community for the logistics side.
Renergen holds the first and only onshore petroleum production right in South Africa, what other companies have you partnered with?
We have partnered with Total for their filling stations along the N3, EPCM Bonisana who are constructing the pipeline for us, Western Shell Cryogenic Equipment who is manufacturing the liquefiers for us, our customers and the United States International Development Finance Corporation, which provided us with $40 million funding to bring phase one online.
What is the potential of liquefied natural gas in South Africa?
I think it is quite large, although I do not think it is going to take off anytime soon, because there are some significant challenges that need to be addressed, for example, we do not have the proper infrastructure to import LNG yet, but the demand for LNG in South Africa is certainly there.
How attractive is South Africa’s LNG sector to potential investors?
I think it is very interesting because South Africa has quite a severe energy deficit and we have the eighth worst polluting economy in the world. To put it into context, if you measure the amount of carbon dioxide output that South Africa produces relative to each dollar of gross domestic product it generates, none of the other BRICS countries are even close to how badly South Africa pollutes. So the introduction of gas is definitely a step in the right direction towards the decarbonization of South Africa’s economy and I think that this should be a priority for the government as opposed to pushing more coal-fired power stations.
What will the exploration landscape look like in South Africa post-COVID-19?
I do not necessarily think that COVID-19 itself is much of a deterrent for upstream exploration, my belief at the moment is that a lot needs to happen from a legislative perspective, in terms of getting investors’ comfort before they start to explore upstream. So, I think the exploration landscape is still quite a while away before it kicks into full gear, and by that I reckon it is another two to three years. There is too much uncertainty and it needs to disappear, point in case, South Africa’s business confidence index according to the Bureau for Economic Research is now the lowest it has ever been.
What other opportunities exist in the Virginia Gas Project?
This project is very big. Phase two of the project is the next opportunity we are looking at, it is also evident in previous reports of how the prospect of helium reserves are enormous, there is more than enough for us to look at in the Virginia Gas Project. Renergen also holds exploration rights in Evander in South Africa, which not only has gas but also has high concentrations of helium as well, so that is also very promising for us.