Renergen’s Tetra4 to produce Helium Rich Gas in Virginia

0
43

Project Name

Virginia Gas Project

Location

South Africa: – 187,427 hectares of exploration and onshore petroleum production rights across gas fields surrounding Welkom, Virginia, and Theunissen in the Free State.

Project Owners

Tetra4 (Pty) Ltd, the field operator, is a wholly-owned subsidiary of Renergen (Pty) Ltd, the overall license holder, which is an emerging producer of helium and liquefied natural gas (LNG), with existing production and sales of compressed natural gas (CNG).

History

The project covers a large area where gas-emitting boreholes have been identified from previous mineral exploration activities.

The gas emitting boreholes (“blowers”) were drilled by mining companies to explore for gold in Witwatersrand formations which underlie the coal-bearing Karoo and Ventersdorp lavas.

Data from the South Africa Council for Geosciences lists at least 136 historic wells within the production area and notes that 68 of them produced gas in the past, 18 are currently capable of producing gas (blowers), 29 have odors, and 28 are previously producing wells that are currently capped. These helium-containing wells and vents were first documented as far back as 1957.

Project Description

The fields contain one of the richest Helium concentrations logged internationally. The natural gas is also very pure with an average of over 90% methane, and almost zero higher alkanes. Liquid Helium will be exported abroad while LNG will be used in South Africa.

The field development plans call for the construction of a 52 km gas gathering pipeline system and cryogenic liquefaction (compression) facilities and, as production increases, the expansion of the entire system.

Pilot Phase

Development of a Compressed Natural Gas (CNG) station for vehicle use.

Phase 1:

Construction of 9 exploration wells, 2 compressor stations and a 60km pipeline gathering network. Compressed natural gas (CNG) station with 3 mmscfd production capacity.

Targets 350 kg/d helium production from year-end 2021

As of September 1, 2021, Tetra4 has two producing (PDP) wells and 23 non-producing (PDNP) wells – the latter is scheduled to be turned on in 4Q 2021.

Phase 2:

Tetra4 plans further development of their acreage with 24 wells in the fourth quarter of 2021, followed by drilling 30 wells in 2022, 70 wells annually in 2023, 2024, and 2025, then a final 47 wells in 2026.

The field will be fully developed by October of 2026 with 311 new wells, 2 PDPs, and 23 PNPs for a total well count of 336 wells.

Development to included a 100 km pipeline gathering network; a Helium extraction and LNG Plant (50 TPD), with future LNG production: > 150 TPD. The LNG plant include LNG & LHe storage and truck fuelling facilities.

Royalty

The production license is subject to a 5% government tax based on wellhead price, plus an additional 1% overriding royalty interest (ORRI) on all wells located within the Goldfields mining leases.

Sales

Tetra4 signed a Gas Sales Agreement (GSA) with Linde Global Helium (Linde) for the purchase of helium gas at the price point of approximately $200/mcf escalating according to US CPI index.

Tetra4 also signed a GSA with Unitrans Passenger Limited (Megabus) for the purchase of natural gas. The gas will be sold in liquefied state by the liter, with the purchase price indexed to a local pricing point for 0.005% sulphur diesel at the Megabus purchase price minus a 30% discount.

Tetra4 plans to sell 30% of its LNG production into the local wholesale LNG market and 70% into the local transport market.

Capital Expenditure

Wells and Connections

Tetra4 budgets for well drilling and completion capital expenditure at ZAR 2.596 million per well, with connection capital of ZAR 0.5 million per well.

Plants

Tetra4 budgets ZAR 5,022 million for the 1P plant ZAR 124 million for connection to the electrical grid, with development of the 2P and 3P Reserves requiring additional plant and connection expenditure.

Helium Market

Market Participants

Major players globally: Air Liquide, Exxon Mobil Corporation, Gulf Cryo, Linde Plc, Messer Group GmbH, PGNIG SA, Renergen, Air Products and Chemicals, Inc., Gazprom, Iwatani Corporation, Matheson Tri-Gas Inc., NexAir LLC, Qatargas Operating Company Limited, Weil Group.

Market Overview

Helium is the second-most-abundant element in the universe (after hydrogen), yet it is a scarce commodity on earth, due to its low density and therefore volatile nature. Of all the elements, helium is the most stable; it will not burn or react with other elements.

Helium has the lowest melting and boiling point of any element (–268.9 ­degrees Celsius). It remains liquid at extremely low temperatures. It therefore remains liquid even near absolute zero (–273.15 degrees Celsius), making it the cooling agent of choice for superconducting magnets, in research and medicine. Since helium doesn’t become radioactive, it is also used as a cooling medium for nuclear reactors.

Almost all helium is produced as a by-product of natural gas (methane) production or liquefaction. It is clean and inert and cannot be synthesized or manufactured. It is a critical component in the manufacturing process, valuable in plasma welding and used to detect leaks in ultra-pure vacuum fabrication chambers. It is especially important for companies that serve high-tech applications such as MRI, semiconductor chip, and fiber optic manufacturing.

The United States has historically been the largest producer of helium in the world (~40%), maintaining a near monopoly, mostly produced from the Federal Bureau of Land Management’s Cliffside Reserve. Helium is a non-renewable resource found in recoverable quantities in only a few locations around the world. Recent developments have brought countries such as Qatar and Russia to the forefront of global helium supply, and new supply from South Africa is also important.A

A new process technology developed by Linde and Evonik, and initially tested by Weil Group (and set to be used in South Africa) could make helium recovery worthwhile even on a smaller scale. The Evonik membrane pre-treats (concentrates) the gas so the air separation and all the other downstream technologies can work (even) more cost-effectively and can also be engineered on a smaller scale. This significantly reduces investment – and ultimately also operating – cost.

The BLM’s Cliffside Reserve in the US was once the primary global source of helium, but it is forecast to be a minor source after 2021, leading the US to be a net importer of helium for the first time in history. The US reserve decline has sparked an urgent need to secure new sources of helium and ensure sustainability of this resource into the future.