Country’s first natural gas producer opens auction for LNG allocation

Renergen, the country’s first onshore petroleum producer, expects its locally produced Liquified Natural Gas (LNG) project – set to come online in 2021 – to be a “game changer” for the domestic market, which relies on imports from neighbouring Mozambique.

The emerging natural gas and helium producer this week opened bids for the allocation of LNG out of the first phase of its Virginia Gas Project in the Free State, believed to harbour some of the world’s largest deposits that are not yet fully explored, as the global shift towards cleaner sources of energy gains momentum.

With a budget allocation of R750 million, the first phase of the development, which is a partnership with Total, will become the first distributor of LNG at filling stations and the only domestic producer of helium.

“By doing an auction we are getting a sense of what companies are willing to pay for a sustainable supply of clean energy,” Renergen CEO Stefano Marani said on Tuesday.

Marani said the first phase of the project is earmarked for the transport industry and the second phase, expected to come online by 2023, will provide LNG networks across major highways in the country with surplus volumes released to the market.

“We see ourselves as disruptors, we are disrupting the diesel industry,” he said.

Natural gas, which offers a cleaner energy source, accounts for less than 5% of the country’s energy mix, but demand is expected to increase in the coming years.

“We anticipate opening filling station at every single major highways along the country, essentially opening up the entire network.”

Marani said South Africa was not even close to fully exploring its natural gas potential and more exploration was needed in the field. The Virginia Gas Project will cover 187 000 ha of gas fields across Welkom, Virginia and Theunissen.

While major institutional funders are increasingly evaluating the financing of new carbon-intensive energy projects, Marani stated that funding for the the Virginia plant was raised through a rights issue in South Africa as well as an IPO on the Australian Stock Exchange.

“The balance of the money was debt funded by the US government, they lent us $40 million for 12 years and the purpose of the loan was to bring helium online.”

Petrochemical giant Sasol imports the bulk of the country’s gas from Mozambique’s Temane and Pande gas fields, which are said to be maturing. On Monday, the Development Bank of Southern Africa revealed that it has committed about R2 billion to fund upward and downstream project development activities in Mozambique to extract natural gas for conversion to LNG export.

The project, headed by French oil and gas giant Total, will explore about 150 trillion cubic feet of gas reserves in Mozambique, and is expected to deliver LNG in 2024.

by Sibongile Khumalo


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