EXPLORATION FOR
EXPLORATION FOR DEVELOPMENT Helium and natural gas could be game-changers Projects that started as licences approved by Petroleum Agency South Africa are starting to produce results, results that will boost the South African economy. Filling up at a petrol station might never be the same again. As a result of exploration rights first being issued by Petroleum Agency South Africa (PASA) 16 years ago, South Africa now stands on the brink of a brand-new market in liquid natural gas (LNG) and helium. Which could have a transformative effect on the regional economy. In 2007 exploration rights to the Virginia area were granted to a company which later became Tetra4, a wholly-owned subsidiary of Renergen. In 2012 a full onshore petroleum production right was awarded and a full Environmental Impact Assessment was completed in 2017. In July 2022 a milestone called “natural gas to plant” was achieved. This test allows for the system to be comprehensively tested, with the inlet line from the gas-gathering system opened to the process plant and then on to the natural gas filtration and pre-compression system. In September 2022, commercial operations of the company’s LNG plant began and in January 2023 the announcement was made that helium production had begun. As custodian, Petroleum Agency SA ensures that companies applying for gas rights are vetted to make sure they are financially qualified and technically capable, as well having a good environmental track record. Oil and gas exploration requires enormous capital outlay and can represent a risk to workers, communities and the environment. Applicants are therefore required to prove their capabilities and safety record and must carry insurance for environmental rehabilitation. The Tetra4 Virginia Gas Project is the only holder of an onshore petroleum production licence issued by the Department of Mineral Resources and Energy (DMRE) through PASA. The production right area covers 187 000 hectares around the towns of Welkom, Virginia and Theunissen. Whereas it took nine years to find the R1.2-billion needed to fund the first phase of Virginia Project, investors are now looking very keenly at its prospects. An amount of R3.6-billion has been invested by Ivanhoe Mines to secure some offtake rights and the Central Energy Fund has purchased a 10% stake in Tetra4 for R1-billion. This is the sort of development and inward investment that is promoted and encouraged by PASA. Sproule, a resources accreditation agency, has given an updated report on the helium and methane reserves in the Virginia gas field. The results were even more positive than previous estimates, with helium reserves up by 620% and methane reserves by 427%. Every computer microchip in the world is produced in the presence of helium and the world uses 85 tons of it every day. Bulk Hauliers International Transport (BHIT) was among the first logistics companies to sign an agreement to take LNG from Tetra4. About 50 of BHIT’s trucks will receive the fuel, which should lead to lower operating and maintenance costs. With the transport sector contributing significantly to pollution, the potential for transformation through these measures is enormous. Renergen has signed an agreement with TotalEnergies for distribution and sales. Renergen intends equipping filling stations with LNG at strategic locations across South Africa to cater for the logistics industry. The first two such stations will be Total stations in Johannesburg and Durban that will be rebranded in green. One station is planned for Harrismith on the busy N3 highway which links these two cities. 46 | www.opportunityonline.co.za
EXPLORATION FOR DEVELOPMENT Contracts have been signed and trucks are being filled up. Trucking companies have started signing up to use liquid natural gas to fuel their vehicles, citing savings and cleaner burning engines. A vast field of natural gas in the northern Free State, regulated by Petroleum Agency South Africa, means that this trend could grow. Credit: Renergen Other manufacturing concerns such as SA Breweries and Ardagh Glass Packaging have also signed up to take LNG. Bespoke depots will be developed to cater to industrial clients such as the glass company. PASA’s actions with regard to gas are in support of the Liquefied Natural Gas Independent Power Producer Procurement Programme (LNG IPPPP), which is part of the broader programme of the DMRE which encourages private investment in renewable energy, namely the Renewable Energy Independent Power Producer Procurement Programme (REIPPPP). The total allocated to gas-to-power in the national power plan is 3 726MW, of which 3 000MW is for LNG. Offshore progress In support of PASA’s stated goal to move beyond exploration to development and production, TotalEnergies has submitted an application to Petroleum Agency South Africa to convert its exploration right into a production right. The TotalEnergies-led consortium, after making world-class discoveries off South Africa’s southern coast off Mossel Bay in the Outeniqua Basin, has now made the decision to proceed to the next phase, which could have enormous implications for the local, regional and national economy. The exploratory drilling campaign employed 195 South Africans with specialist skills but the potential spinoff is enormous for the Western Cape and South Africa, if the find leads to drilling and commercialisation. PASA has noted the significance of international oil companies committing to exploration off South Africa’s coast. More exploration will guarantee that interest is maintained. The next phase of the project, a gas-market development period, is not the same as an immediate decision to start building pipelines and decks, but it is a step along the way. The Luiperd and Brulpadda discoveries were made in the Block 11B/12B areas. The joint venture has decided to give up a northern portion of its right, reducing the proposed area to be worked to 12 000km², whereas the exploration right extended to more than 18 000km². TotalEnergies’ joint venture partners in Block 11B/12B include QatarEnergy and Canadian Natural Resources. If the process moves further along to the point where TotalEnergies obtains all the environmental permits it needs and starts to develop the resource, some estimates suggest that gas could begin to flow by 2026. PASA plays an important role in developing South Africa’s gas market by attracting qualified and competent companies to explore for gas, as in the case of TotalEnergies and its partners. Another major focus is increasing the inclusion of historicallydisadvantaged South Africans in the upstream industry. In support of this goal, PASA focuses on educational projects that promote Maths, Science and Technology, including exhibitions, career presentations, three-year internships for South African graduates and a contribution to University of Fort Hare for a Geological Chair. Onshore exploration rights have been granted by PASA in several parts of the country. The agency is determined to see that the next phases, development and production, are reached. Credit: Shutterstock petroleumagencysa.com Petroleum Agency SA @sa_petroleum Petroleum Agency of South Africa @petroleumagency
