Renergen, developer of South Africa’s first helium and liquid natural gas (LNG) facility, said yesterday it came closer to becoming a global helium player in the six months to August 31, after it reached many goals of Phase 2 of the project.
It said the Virginia Gas project (VGP) remained a Strategic Integrated Project as designated by the South African government, and it benefited from the support of the US Development Finance Corporation (DFC) alongside its new lending partner Standard Bank of South Africa.
The company said it also cemented a place as a significant player in the local LNG market during the six months.
A significant gas shortage, or a "gas cliff" was expected in South Africa from the second half of 2026 and the company had been engaged in many discussions with large LNG consumers since the anticipated shortage was announced.
A key strategy during the six months was to ramp up LNG production from Phase 1, and to secure funding to develop Phase 2.
Capital spending on Phase 2 was expected to be $1.2 billion (R23bn), with $750 million of debt already secured.
The equity for Phase 2 was intended to be raised in two tranches with the primary tranche being sufficient to see the company bring a 30 million standard cubic feet plant into operation.
“A plant of this size is sufficient to cover all debt payments while still producing healthy profits. The remaining equity tranche will see the plant expanded to a 45 million standard cubic feet per day plant capable of producing a previously announced estimated Ebitda of between R5.7bn and R6.2bn per annum, once the plant is in full production,” the group said in its annual financial results yesterday.
This full production was expected to occur in the financial year after construction was complete, but not before the 2027 financial year, the group said.
“We will secure the balance of the funding in US capital markets amid peers in the transition energy sector,” the group, which is planning a Nasdaq listing, said.
Some of the goals in the past year included that 2 386 tons of LNG was produced.
– Senior debt funding by the DFC ($500m) and Standard Bank ($250m) was approved.
– A bridge loan of R303m was acquired from Standard Bank and a subscription for Renergen debentures amounting to $3m (R56m) by AIRSOL SRL was made, a transaction linked to the planned initial public offering of Renergen shares on Nasdaq.
– An LNG offtake agreement was concluded with Time Link Cargo, with supply expected to start from the first quarter of the next financial year.
– An additional gas drilling campaign of about 15 wells was begun. The first showed a helium concentration above 3% and a flow rate of 70 000 cubic feet per day.
After spudding additional wells, these new wells were showing early signs of gas and were being assessed and tested.
– Additional gas reservoirs from the analysis of completed gravity and aeromagnetic surveys were documented.
The VGP comprises exploration and production rights over 187 000 hectares of gas fields across Welkom, Virginia and Theunissen, in the Free State Province in South Africa.
The company said its next quarterly production figures would show reduced LNG production due to downtime for the repairs of a leak in the helium train, reintegration and scheduled maintenance.
LNG production was at an average rate of 17 tons per day of which 92% was sold to the group's two local customers with the balance remaining as closing inventory.
Tetra4 expected to reach the maximum nameplate capacity of 50 tons per day by the first half of 2024, as the drilling campaign progresses along with the connection and tie into the existing gas gathering pipeline infrastructure.
On the helium production, the group said commissioning was on track to commence production before the end of this year.
Phase 2 would produce up to 688 tonnes of LNG per day and 4.2 tons of helium per day once fully ramped up to nameplate capacity.
Renergen had secured multiple 10 to 15-year take-or-pay offtake agreements with several global industrial companies for just over 50% of the anticipated helium production.
The balance was earmarked for sales in the international spot market.
In the six months revenue from ordinary activities increased by R22.6m from R1.2m for the six-month period ended 31 August 2022 to R23.8m.
The total loss increased by 77.6% from a loss of R24.5m to a loss R43.5m in the current reporting period.
BUSINESS REPORT