The R8 investment that could be worth R1.7 trillion — South Africa’s first helium plant starting up this month
South Africa will become one of only eight liquid helium producers in the world later this month.
Renergen CEO Stefano Marani recently told CNBC Africa that the first phase of the company’s Virginia Gas Project in the Free State, which started construction in 2019, is set to be commissioned by end-July 2022.
The company reckons that the helium deposits at the 187,000-hectare facility, which will be operated by its subsidiary Tetra 4, could be the richest concentration of the gas in the world.
Marani and chief operating officer Nick Mitchell bought the gas rights in the area for $1 in 2012, worth about R8 at the time.
Initially, they only had extraction of liquified natural gas (LNG) in mind, but their survey showed massive helium potential estimated to be worth more than $100 billion (R1.71 trillion).
The plant will now extract both products, which will be in high demand due to the world’s growing energy demand and the need for helium in semiconductor and rocket fuel manufacture.
LNG is methane gas that has been supercooled to -160 degrees celsius, a state in which it has a very high energy density.
It can replace fossil fuels like petrol or diesel in various applications, including motor vehicles, reducing overall energy usage, environmental impact, and costs.
Helium’s unique properties make it invaluable for use in semiconductors, rocket launching propellant, medical devices, and the manufacturing of fibre optic cables and TV sets, among many other applications.
“Pretty much any modern-day creature feature that you could want wouldn’t exist without helium, so it is pretty important,” Marani explained.
Stefano Marani, Renergen CEO (left) and Nick Mitchel, Renergen COO (right)
Marani said the first phase of the Virginia Gas Project was financed by the United States government and local investments from Mazi and Sanlam.
He explained it would act as a proof-of-concept to show that the gases were readily available and that Renergen could separate them from each other.
Initial outputs will be relatively small, with a 50 tonne-per-day nameplate capacity for LNG.
“It’s about 175,000 litres of diesel equivalent in terms of how much energy it is,” Marani said.
The company has already lined up two big customers that will buy its LNG— Ceramic Industries (a subsidiary of Italtile) and Consol Glass — to help them wean off their operations from heavier fossil fuels.
The helium produced will be around 300-350kg, all of which will be exported.
There is currently no method for synthetically creating helium, making it highly valuable and sought after.
The volume is equal to about one and a half times South Africa’s entire helium consumption.
Aerial view of Renergen’s Tetra 4 Virginia Gas Project phase 1. Image credit: Ivanhoe Mines
Ceramic Industries and Consol Glass will consume around 60% of phase 1’s LNG, while the remaining 40% will be available for trucks in the logistics industry.
Mitchell told Business Fleet Africa that the company has been speaking to many fleet owners and said the intent to secure that volume was “robust” across multiple potential customers.
“We believe the next offtake agreement is imminent and that a single entity will likely secure all the remaining volumes,” Mitchell said.
The LNG-conversion kits carry a once-off cost of R250,000, but lower the truck’s long-term running costs.
“The substitution levels that we are seeing across several kit manufacturers and several truck manufacturers that we’ve tested it on, ranges between 40% and 60% combined with a 25% to 30% discount on the energy itself, resulting in a substantial fuel saving for the operator for every kilometre travelled,” Mitchell said.
Marani said LNG could also be used as an alternative fuel for generators, providing a 70% reduction in carbon emissions at a significantly lower cost.
Tetra 4 recently took delivery of four DAF CF430 duel fuel trucks from Babcock Transport Solutions.
Marani said the project’s second phase would be a significantly larger endeavour on a “global scale”.
The company plans to reach financial close for this phase by early 2023, with commercial operations starting in 2025.
The plant employs about 75 people, and phase 2 will bring that figure to 150 or 160 people.
“The biggest impact is going to be the additional people that our wholesalers and our customers employ for the gas…from a technical perspective and from an operational perspective,” Marani said.
“I really see this project as being a catalyst for the Free State. It’s not like a traditional mining company where it becomes the bread basket for the area and the sole employer.”
“We’ve got access to the N1, N3, and N5 highways, all within almost equal distance.”
“The ground is flat, there is a lot of available land, and it’s relatively well priced.”
“Now you’ve got a source of clean, sustainable energy in the area, which means from an attractiveness perspective, you are sitting in a position where strategically it actually makes more sense to set up industrial operations and manufacturing operations in the Free State over, say, Joburg,”
For these reasons, Renergen believes its plant could have a much longer-lasting legacy in the area than mining houses.
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