The company bought gas rights from land that would be worth millions for US$1.

(CNN) — When start up The South African company Renergen purchased production and exploration rights to some grasslands near Virginia, a town in the Free State province of South Africa, with its founders hoping to find small reserves of natural gas that could fuel mining opportunities nearby. .

According to CEO Stefano Marani, they paid $1 for the rights in 2013, and began analyzing the composition of the gas flowing from two rusted drill pipes that had been installed years earlier for mining exploration. What they found was an unusually high concentration of helium.

Besides inflating party balloons, helium has many commercial applications. When condensed into liquid form, it is an essential refrigerant component used in the manufacturing of microchips and in the operation of life-saving MRI technology. However, global helium prices are volatile and supply is irregular, as this gas is produced in fewer than 10 countries in the world.

Unknowingly, Renergen had struck gold. Today, the company claims more than 7 billion cubic feet of proven helium reserves at the Virginia Gas Project, which could be worth more than $4 billion, and potentially up to $12 billion if other potential reserves are included. It is possible

Renergen COO Nick Mitchell recalls, “We had a modest and humble aspiration to set up a small-scale (gas) power station that could supply a few megawatts to some nearby mining operations.” “We had no idea of ​​the magnitude and scale of this helium stockpile.”

The company managed to produce liquid helium from the plant for the first time in January 2023. It hopes to begin commercial helium extraction operations next month, after a year-long delay due to a leak in the vacuum seal of the helium cold box. with natural gas, then processing it and delivering it to customers, such as Linde, a global engineering company.

small footprint

What makes Renergen’s natural gas reserves so special is the unusually high concentration of helium. According to Marani, the average is 3%, and in some places it is as high as 12%. In contrast, in the US, which is the world’s largest supplier of helium, the average concentration is 0.35%, and in Qatar, another major country, the average is 0.04%, according to the United States Bureau of Land Management.

This could make Renergen’s helium more environmentally friendly, according to Chris Ballantine, professor of geochemistry at the University of Oxford in the United Kingdom. Helium is typically produced as a byproduct of liquefied natural gas (LNG) – a mixture of gases that is predominantly methane – he explains, and only above a certain concentration (usually around 0.3%). It is economically beneficial. Remove the helium yourself.

This means that most of the time, helium supply is dominated by hydrocarbon producers who extract and sell helium separately, and so production is associated with a higher carbon footprint, he adds. But the higher concentration of helium means less associated methane is produced, reducing your carbon footprint.

Aerial view of a well at the Virginia Gas Project.  (Courtesy: Renergen)

Aerial view of a well at the Virginia Gas Project. (Courtesy: Renergen)

He says, “What makes Renergen’s surveys so interesting is that, although there are hydrocarbons associated with helium production, the footprint is very small. In fact, they found a primary helium gas system.”

Ultimately, Ballantyne hopes the industry will move away from producing helium from LNG toward sources such as gas fields, where helium is produced with nitrogen, as discussed in a recent study he co-authored .

Another advantage of higher concentrations is cheaper production. “We are a very cheap helium producer compared to other people,” Marani says. He explains, “We drill very shallow wells, maybe between 1,000 to 1,500 feet, low cost and small footprint, and the gas comes out naturally of its own accord.”

African supply point

Ballantyne says that at a time when global helium supplies are often disrupted, a new player in a different geographic area is very welcome. “We are in a supply crunch at the moment, because we only have a few limited supply points…places like Renergen will definitely alleviate that,” he says.

Currently, none of the world’s helium is produced in Africa: helium-rich gas fields are located in Tanzania, but they are not yet in commercial production.

Marani says Renergen’s gas project was designated an “integrated strategic project” by the South African government, which helped speed up regulatory approval processes.

According to Mitchell, the company’s “phase one project”, a small pilot project funded by the US government, will produce about 350 kilograms of helium per day, enough to meet all of South Africa’s needs plus a surplus. Its “phase two project”, which is expected to come online in 2027 and has received funding from the US government and the South African Standard Bank, will increase production to 4.2 tonnes per day, representing 6% to 8% of world supply. Will produce between %. According to the Research and Markets Company, the global helium market is expected to reach a value of more than US$6 billion by 2027, generating significant profits.

Despite the company’s ambitious forecasts, the last quarter of 2023 saw a significant decline in its share price, which according to experts could be related to criticism on social networks of the company’s transparency. However, Marani is confident that Renergen will be able to overcome investors’ skepticism, saying it will “not only significantly reduce the risks to the project going forward, but will also deliver on the deliverables.”

In December, the company announced it had sold a 5.5% stake in Tetra4, the Renergen subsidiary that owns and operates the Virginia gas project, to Mahalco Energy Fund and Third Way Investments, two investment management companies, for R550 million ($29 million). In Johannesburg. The company plans to raise more capital through an initial public offering (IPO) on the Nasdaq stock exchange in the United States. The company is already listed in South Africa and Australia.

“It will take a lot of time to build trust, I have no illusions,” says Marani. “I think helium activation is the first step in that process.”

Eleni Giokos, Michael Cross and Tom Bouchier Hayes contributed to this article.

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