We reunite your funds

Emerging liquefied natural gas (LNG) and helium producer Renergen has signed a $40-million loan agreement with the Overseas Private Investment Corporation (OPIC), marking a significant milestone for the company, which recently listed on the ASX.

The loan, signed on Wednesday, was originally announced earlier this year but was subject to execution of the full loan agreement prior to its proceeds becoming available for the Virginia gas project.

It now provides Renergen with access to the required capital to build the first phase of its Virginia gas project, in the Free State, thereby providing greater certainty of the project’s anticipated production in the first half of 2021.

The bulk of the funds, $18-million, will be spent on ordering the helium and LNG liquefiers, Renergen CEO Stefano Marani tells Engineering News Online.

The balance of the funds will be drawn down early in 2020 and will be allocated for the construction of the gas gathering network, as well as the balance of plants and utilities to support the operation.

Having executed the final binding agreement, Renergen will receive the first disbursement from the loan in the coming days. The loan has a 12-year term, with a grace period before principle is due of just less than three years, thus taking into consideration the construction and commissioning time, the company says.

Denominated in dollars and fixed against the US Treasury Curve, the loan provides Renergen with “very favourable terms” for long-term borrowing, given the current low interest rate environment.

Commenting on the agreement, Marani says that, with significant helium supply shortages forecasted, and the increasing importance of securing helium, the approved loan is a major endorsement of the project by the US government.

OPIC structured finance VP Tracey Webb, meanwhile, notes that “OPIC is pleased to partner with Renergen and provide financing to support private-sector-led economic development in South Africa, expand trade and commercial ties between the US and Africa, and ultimately increase the global supply of helium”.

The signing of the loan agreement follows the announcement of the appointment of EPCM Holdings subsidiary EPCM Bonisana as the engineering, procurement and construction contractor to start construction of the Virginia gas project.

The contractor will be responsible for building the gas gathering system that will connect the gas wells for the project.

The gas gathering system is a critical component of the project, as it will reticulate all the gas to a centralised point for processing, before the LNG and helium is sold to customers.

To be developed over two phases, the first phase will see the reticulation of the 12 existing wells, along with several new wells to be drilled in the coming months. This will result in the production of about 2 700 GJ of LNG and 350 kg of liquid helium a day, starting in 2021.

Renergen will produce up to 10 000 GJ of LNG a day on reaching full production. This amount of energy is equivalent to 277 000 ℓ of diesel a day.

Marani previously explained to Engineering News Online that global consumption of helium was about 77 t a day and, depending on what Renergen finds in the sandstone deposit, the company could help meet the global demand for helium.

Should the sandstone deposit be what the company believes it is, then the project has the possibility of “seriously denting the shortfall and current supply”, he enthused during previous interviews.

The sandstone deposit’s figures will be released later this year.

The sandstone deposit is a trap around 300 m from the surface, meaning that drilling will be shallow with good levels of permeability, and very high concentrations of helium. In terms of its horizontal drilling programme, Renergen intends to drill up to 1.5 km horizontally into the sandstone.

Meanwhile, considering the tough business environment in South Africa, Marani tells Engineering News Online that Renergen offers a cleaner and cheaper energy alternative within an economy that is under enormous pressure.

“Offerings like ours become particularly appealing in the sense that we’re offering companies the ability to squeeze additional margin out of their own businesses,” he explains, adding that at the same time that Renergen is offering a cheaper energy alternative, it is also decreasing the country’s carbon footprint at a time when a carbon tax is being introduced.

Renergen is compelled to comply with the carbon tax and pays it in the production of the LNG, like every other business, says Marani, adding that carbon tax is not levied on LNG when used as a fuel, thereby adding to its competitiveness over diesel.

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