Vusi Dlamini, Operations Manager for the Renergen Tetra4 Virginia Gas Project, said: Photo: Motlatsi Mofokeng
Once a small gold mining town in the Free State of Virginia, the small Virginia town was left abandoned, abandoned and in extreme condition after a disastrous 1994 mine pursuit failure left 17 people dead and turned it into a “ghost town.” are in poverty.
But liquefied gas and helium projects promise to revitalize the state, as the state aims to become the nation's energy security center. Touted as a game-changer for the local economy, the Renergen Tetra4 Virginia gas project is set to become a R20-billion project, the first of its kind in South Africa and one of only 15 liquid helium producers in the world. One of the people.
Helium is a key element in renewable energy technologies, such as the production of photovoltaic panels and wind turbines. It is also used in many other fields, including scientific research, medical technology, high-tech manufacturing, space exploration, national defense, deep-sea diving, welding, and particle accelerators.
Nick Mitchell, Lenagen's chief operating officer, said liquid helium is part of the natural gas distillation process. The company drills between 400 and 700 meters underground to extract hydrocarbons and bring natural gas to the surface.
“Natural gas is a mixture of methane, helium, nitrogen, and carbon dioxide.”2 and other trace elements. Helium cannot be extracted alone. “We need to extract the entire natural gas stream and then start processing it to the point where we can separate the purified liquid helium,” he explained.
Msolisi Dukwana, then Prime Minister of the Free State, mentioned the Renergen Gas and Helium project at the Energy Security Indaba hosted by the state government in Bloemfontein in November 2023. . Our state's central geographical location not only makes it cost-effective in promoting trade, but also ensures easy and convenient access to markets across the country,” he said.
“It is estimated that there are 23 billion cubic feet of natural gas in the Free State. In 2019, Renergen discovered a large amount of helium in Virginia, which is the world's most abundant helium on record. It is said to be a source of helium.
helium hub
The Renergen helium hub is based on one of South Africa's largest gas projects, although several gas projects are underway in other provinces, including Mpumalanga, Eastern Cape and Gauteng. Mpumalanga in particular is known to have at least four liquid natural gas (LNG) projects under development.
The Renergen project has the potential to be internationally competitive due to its rich reserves of helium and natural gas. However, gas exploration in South Africa faces challenges including environmental risks and limited long-term returns, as well as factors and concerns regarding economic viability and helium quality.
Gas is a fossil fuel and a major contributor to the climate crisis, according to a recent report in the Green Economy Journal. The report highlights that new gas infrastructure could hinder the transition to renewable energy and that gas, like coal, can be harmful to the climate, especially due to its high methane content. are. The findings suggest that South Africa's focus on gas development could undermine efforts to curb global warming.
energy challenges
Mitchell told Oxpeckers' investigative and environmental journalism division that Virginia's gas and helium projects offer a solution to the country's energy problems. “If we consider the energy mix as a whole, we are facing an energy crisis, and it is a well-known fact that we will face a nationwide natural gas crisis over the next three years,'' he said.
South Africa currently relies heavily on imported natural gas from the Mozambican oil fields operated by Sasol.
“Sasol has announced that these areas will end around July 2027. In that context, this is very significant as energy in the form of conventional electricity only accounts for about 27% of South Africa’s energy mix. “If we start losing other important resources like natural gas, we're going to face significant challenges,” he said.
Mitchell said the gas from the Free State project will be used domestically and will replace more traditional fossil fuels such as coal, heavy oil, diesel, LPG and paraffin in the industrial, logistics and power sectors.
“Given that natural gas is the cleanest of all fossil fuels, our products enable the transition to Just Energy and provide an important option for companies that rely on other products for their energy needs. I think we will provide it.”
commercial feasibility
Helium was discovered in the Free State in the 1960s, but was not an original exploration target for Lenergen, which bought the gas rights to 187,000 hectares of land for $1 (about R8 at the time) in 2012.
“We purchased this project with the intention of establishing a pure gas power generation operation and selling the power to one of the nearby gold mining companies,” Mitchell said.
“Historically it was known that helium existed in gases, but we didn't understand the commercial feasibility of the concentrations we now know with certainty.”
Gas samples taken in 2013 showed high helium concentrations, “so we had to look into that market a little more closely. Then, to understand its complexity and potential, we I started digging deeper into the world of helium. [because] Admittedly, we knew little about helium other than its use as a party balloon and diving gas. ”
A few weeks later, Linde Global Helium's top executives flew from New York to South Africa to sign a helium purchase agreement, he said. “This agreement meant we needed to transform from our original concept of power generation to the full-scale cryogenic LNG and liquid helium facilities we have today.”
Mitchell said the helium device would begin production in 2023. Currently listed on the JSE and Australian Stock Exchange, Renergen is backed by more than 40,000 shareholders, including major investors such as Maji Capital and Sanlam.
The company has secured significant funding for the project over the years, including a $500 million commitment from the U.S. Development Finance Corporation and a $250 million commitment from Standard Bank for Phase 2 development.
Oil and gas sector
Mitchell has a background in the energy industry and specializes in South Africa's oil and gas sector, with a focus on early stage company development. He currently serves as Chairman of the South African Onshore Petroleum Association.
His business partner Stefano Marani, currently CEO of Renergen Ltd, has experience in structured finance and advisory services. He worked at Morgan Stanley and built the Sub-Saharan African debt capital markets business before leaving the bank to start his own financial services firm.
In the Free State, Renergen is partnering with local black-owned fund managers Mahlako A. Phafra Investments and Third Way Investment Partners to drive growth.
Mr Mitchell said Maflaco Gas Energy, a black woman-owned gas asset investment company, had acquired 5.5% of Tetra 4, a subsidiary of Renergen, for R515 million, adding: “We are betting R10 billion of enterprise value on this business to further diversify.” primary energy. Mahlako Energy Fund is an equity fund that invests in energy projects and companies. It is structured as a commander [limited] partnership. “
He acknowledged that the project was behind schedule and over budget, leading to recent criticism in the media and social platforms.
“However, in the process of achieving this we have moved what was once considered a stranded asset in the Free State into exploration, development, construction and now finally into an operating business,” he said.
In the process, the project created 74 permanent jobs and 285 temporary jobs in the first phase, which will increase to 245 permanent jobs and 2,865 temporary jobs in the second phase, he added.
environmental risk
Yegeshni Moodley, a senior activist with environmental justice group Groundwork, said a geohydrological report prepared by experts showed high risks from gas exploration in the area.
“Shallow aquifers, gold mining pits and areas already affected by acid mine drainage present a very high risk of water pollution,” she said.
Concerns about climate change are also a high risk, she said, adding: “Gas leaks are occurring across the value chain and methane is a powerful greenhouse gas, polluting 80 times more than CO2 over 20 years. ” he said.
Communities living in the area are already affected by gold mining and would be doubly burdened if gas exploration at the scale proposed was approved, Mr Moodley added. “As the world transitions away from fossil fuels, gas will no longer be used and any investment will be abandoned. This will leave the country with even more debt and restructuring costs.”
broken promise
Makotla Sehri, a local environmental activist and community leader, said Renergen was not uplifting the communities living in the Reiwereptswa district municipality, which includes the towns of Welkom and Teunissen in Virginia.
“Since 2022, we have several contracts with Renergen,” he said. “They promised to upgrade a community center in Virginia. Instead, a steel container was delivered. They also promised to install solar panels on their farms. They have not fulfilled any of their promises.”
It said Lenergen had failed to comply with environmental impact assessments, job creation and social labor plans and community consultation. “No one knows about their operations, and no one knows how long they will last.”
Sefri doesn't know of any community members employed by Renergen. “I don't even know where their offices are in case there is a vacancy or some kind of employment opportunity. I can see their vehicles, but I can't see their offices.”
Mr Sehri said the local farming communities most affected by Operation Renergen were in the dark and did not know what their future held. Farmers depend on their crops and do not know how Operation Renergen will affect them.
“Rural communities and neighboring communities are struggling with poverty, but we have a multi-billion dollar project on the horizon, and this is a matter of grave concern.
“Since the construction of the gas plant, grain heights are not as healthy as before. The output shows that there is a problem with the groundwater. So we can say that Renergen has brought nothing but misery to our community. ,” Sefri said.
“We're not against development, but when development happens, it should be done in a way that benefits the community that hosts it,” he said.
This study is part of the Oxpeckers #PowerTracker research series entitled 'The Human Cost of Energy in Africa'. Refilwe Mochoari is a Free State-based journalist who focuses on health and environmental issues. The video production was by Motlatsi Mofokeng and Luntu Ndzandze.
