Renergen may have struck gold with gas

In August, Renergen announced its first acquisition, that being 90% interest of Molopo South Africa Exploration and Production, the country’s first and only company with an onshore petroleum production right for an implied value of R650 million. Molopo, whose right applies to a 187 000 hectare area, is close to the production stage. Mineweb recently went on a site visit to take a look at the natural gas and liquefied helium company.

“There were many boreholes that were drilled by other companies in the area for mineral exploration purposes, and that gives a database (to use when looking for gas-rich holes),” said Rob Katzke the operational manager of Molopo.

In the past multiple strikes have been anecdotally referred to, but given that these were originally for gold or coal exploration none of the results were officially recorded. In addition, the gas ingress in many of these instances was cemented in so that the exploration of gold could continue.

For a hole to be considered economically viable it needs to have a flow of at least 40 cubic feet per minute (cfm). For holes that emit less, there has to be more than one in a cluster before they are considered viable because of the expensive infrastructure required.

Said Katzke: “For a kilometre-long pipeline you’re looking at a cost of close to a million rand. There’s also no point in having only two good holes that are 40km apart. We’ve also just acquired a compressor (used to compress the gas into cylinders) for R10 million, so you can’t have one at each hole either. Ideally we need a small cluster of, say, 4 holes, each with a minimum flow of 40 cfm.”

Katzke added that there were already 10 holes that were emitting gas, one of which had a flow of 180cfm. Molopo is in the process of drilling the first three new wells in a cluster of six that have recently been approved by the regulator.

As such Molopo is in possession of full environmental authorisation for all of its production drilling activities. The permit states that when a target site is identified, a site specific environmental management plan must be completed. This is managed by an outsourced environmental consultant like Environmental Impact Management Services (EIMS) in conjunction with the regulator, Petroleum Agency South Africa (PASA), to ensure that all activities are completed in accordance with the Act.

When all 10 holes are connected, it will amount to about 72km of pipeline which is a substantial capital layout. Molopo has already commissioned EIMS to begin the full EIA process for approval to connect all of its existing wells and the planned Helium Liquification facility.

This process is estimated to take 12 months but certain sections that traverse water ways could take slightly longer as this will require water use licenses. The operation has been planned in stages which means that areas unaffected by the water use license can commence as soon as the EIA is completed. The areas affected by a water use license will be connected into the system once the approval for that permit is granted, but the water department’s back log means this could become a waiting game.

Plans in place

Renergen CEO Stefano Marani said that gas reserves in the area had the potential to benefit the Free-State economy, particularly the towns of Virginia, Theunissen and Welkom, which had long been on the decline due to mine closures.

“What we’re doing is not only going to support the much needed energy requirements we have as a country,” said Marani. “It’s also, hopefully, going to offer much needed support to this economy and give desperate people an opportunity to make a living.”

Molopo has a plan in place to acquire a petrol garage on which a Compressed Natural Gas (CNG) dispensing station will be installed, as well a workshop for cars and taxis to be converted to run on CNG. Marani said the station alone would provide up to 12 extra jobs for people who would be trained to retrofit cars and taxis with the necessary mechanics. This would make public transport a much more profitable business.

“It costs around R20 000 to convert a taxi. But, compared to petrol, gas saves you 20% or more so a taxi owner would be able to recoup that expense within a year,” said Marani.

The company already has an agreement in place with bus company Megabus who will run 10 buses exclusively on CNG at the Virginia depot, and if the project is successful it would convert a large proportion of the remaining buses in the area.

Nick Mitchell, managing director of Molopo, said the gas contained between 3-4% helium and that Molopo had successfully negotiated an off-take agreement with German industrial gas company Linde. The facility will be a first in South Africa.

“They have begun the engineering of the plant already to a level of around 90%. It will cost about €15 million. In terms of the arrangement we would commission the plant but Linde through their local subsidiary Afrox will operate and maintain it. To close the loop, Linde Global Helium will procure the helium through a take or pay off-take agreement,” said Mitchell.

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