The R8 investment might be worth R1.7 trillion — Plans for South Africa's first helium plant in 2023 are enormous

South Africa may soon become the world’s eighth producer of highly sought-after helium.

That is, assuming Renergen’s Virginia Gas Project, the country’s first and only on-shore petroleum production plant, can be restarted in the coming months.

Renergen’s goal to begin manufacturing liquid helium in July 2022 was delayed due to the facility’s tough year.

Helium is the second-most plentiful element in the cosmos, yet it is far rarer on Earth. The gas cannot be produced synthetically and must instead be recovered from natural gas wells.

 Its features, including as its low boiling point, low density, low solubility, and excellent thermal conductivity and inertness, make it ideal for a variety of uses other than floating balloons.

This includes the production of semiconductors and fibre optic cables, the treatment of respiratory problems, and rocket launch procedures.

Helium is utilised in the latter scenario to cleanse hydrogen systems, pressure ground and flight fluid systems, and as a cryogenic cooler, among other things.

Renergen thinks the world’s largest helium reservoir is hidden beneath an 187,000-hectare plot of land in the Free State.

The company’s directors, Stefano Marani and Nick Mitchell, first planned to produce liquefied natural gas (LNG) when they obtained the land’s gas rights in 2012 for a meagre $1, which was worth around R8 at the time.

However, Renergen reported in October 2021 that they had discovered an extremely high concentration of helium on the site, with a reserve of the gas estimated to be as large as 9.75 billion cubic metres.

That would make it larger than all known reserves in the United States, the world’s greatest helium producer at the moment.

It would also imply that their first R8 investment may be worth more than $100 billion (roughly R1.7 trillion)

More cautious estimates place the deposit at roughly 920 million cubic metres, which would still be a significant discovery.

Renergen CEO Stefano Marani spoke with MyBroadband about the project’s development in 2022 and what is ahead in the coming year.

The Virginia Gas Project’s initial phase was funded by the US government and local investments from Mazi and Sanlam.

The site’s construction began in 2019, and it will begin producing LNG for commercial usage in October 2022.

Renergen’s current production rate is 30 tonnes per day, which it hopes to expand to 50 tonnes per day by 2023.

Ardagh Glass Packaging (formerly Consol) and Ceramic Industries, a part of Italtile, are Renergen’s biggest LNG clients.

It has also spoken with fleet owners about modifying their heavy-duty vehicles to run partially on gas.

Tetra 4, Renergen’s subsidiary that operates the mine, already employs four of these vehicles.

According to Marani, the war in Ukraine would provide major hurdles for most firms across the whole value chain by 2022.

However, Renergen was hampered by the collapse of a conduction oil system 10 hours before the plant would have generated its first liquid helium.

According to Renergen, the component was placed improperly, resulting in irregular conduction oil heating.

Tetra 4 management opted to shut down the plant and fix the installation to avoid further harm.

“There was a significant amount of expectation, both internally and externally, and the failure by a system which wasn’t even part of the plant was truly unfortunate in that it delayed helium production,” Marani said.

“It wasn’t all bad however, and we have made significant progress on the finalisation of Phase 2 while also drilling and making some significant gas strikes which gives additional comfort that our understanding of the geological model is improving significantly.”

Marani stated that liquid helium production was “close,” but he was unable to provide exact timeframes.

Linde Group, the world’s largest industrial gas business, will initially be Renergen’s sole helium customer.

Afrox, a South African chemical industry firm, is one of the Linde Group’s many subsidiaries.

However, Marani has stated that all of the approximately 300-350kg of helium that they would initially generate everyday will be exported.

That is already almost 1.5 times South Africa’s entire daily usage.

The financial closure and start of construction on Phase 2 of the Virginia Gas Project is Renergen’s most critical target for 2023.

This component of the proposal, according to Marani, has the ability to catalyse economic development in the local region by providing a node of clean, sustainable energy in an area with an abundance of skilled labour and excellent transportation infrastructure.

“Essentially, the Welkom and Virginia region could easily become a replica of the Ekurhuleni area, bolstering South Africa’s manufacturing capabilities and providing a gateway to employment,” Marani added.

Marani stated that financing chances are “very strong” for 2023.

The Department of Energy’s Central Energy Fund is one of the investors, purchasing a 10% interest in Tetra 4 for R1 billion.

Renergen has also formed a strategic alliance with Ivanhoe Mines, with an initial investment of $13 million for a 4.35% share in Renergen.

Renergen intends for the project, when completed, to create 5,000kg of helium per day, over 600,000 tonnes of LNG per day, and to house a 60MW gas-to-power plant.

More images of phase 1 of the Virginia Gas Project in the Free State may be seen below.