The company bought gas rights for $1 on land that would have been worth millions

(CNN) — When launch South African company Renergen has bought mining and exploration rights to some grassland deposits near Virginia, a city in the Free State province of South Africa. Its founders hoped to find small reserves of natural gas that could fuel nearby mining opportunities.

They paid $1 for the rights in 2013 and began analyzing the composition of gas flowing from two rusty drill pipes that had been installed years earlier for mineral exploration, according to CEO Stefano Marani. They discovered abnormally high concentrations of helium.

Besides inflating balloons for parties, helium has many commercial uses. When condensed into liquid form, it is an important component of the refrigerant used in the production of microchips and life-saving MRI technology. However, global helium prices are volatile and supplies are uncertain because the gas is produced in fewer than 10 countries around the world.

Without knowing it, Renergen found gold. Today, the company says it has more than 7 billion cubic feet of proven helium reserves at the Virginia Gas project, which could be worth more than $4 billion, and potentially up to $12 billion if other potential reserves are included.

“We had a humble, modest desire to build a small (gas-fired) power plant that could supply a couple of megawatts of power to some nearby mining operations,” recalls Nick Mitchell, chief operating officer of Renergen. “We had no idea of ​​the size and scale of this helium deposit.”

The company was able to produce liquid helium at the plant for the first time in January 2023. After delays for a year due to a leaking vacuum seal on a helium cold box, the company hopes to begin commercial helium mining operations next month. along with natural gas, and then processes and supplies it to clients such as Linde, a global engineering company.

Smaller footprint

What makes Renergen’s natural gas reserves so special is its unusually high concentration of helium. The average is 3%, with some places as high as 12%, Marani said. In contrast, the US, the world’s largest supplier of helium, has an average concentration of 0.35%, and Qatar, another large country, has an average concentration of 0.04%, according to the US Bureau of Land Management.

This could make Renergen’s helium more environmentally friendly, according to Chris Ballentyne, a professor of geochemistry at the University of Oxford in the UK. Helium is typically produced as a by-product of liquefied natural gas (LNG), a mixture of gases consisting mainly of methane, he explains, and only above a certain concentration (usually around 0.3%) is it economical to extract helium.

This means that most of the time the helium supply is dominated by hydrocarbon producers who extract and sell helium separately, and therefore the production has a high carbon footprint, he continues. But higher helium concentrations mean less methane is produced, reducing carbon dioxide emissions.

Aerial view of a well at the Virginia Gas project.  (Courtesy: Renergen)

Aerial view of a well at the Virginia Gas project. (Courtesy: Renergen)

“What makes Renergen’s research so interesting is that while there are hydrocarbons associated with helium mining, the impact is much lower. In fact, they discovered a primordial helium gas system,” he says.

Ultimately, Ballentine hopes the industry will move away from producing helium from LNG to sources such as gas fields where helium is produced along with nitrogen, as discussed in a recent study he co-authored.

Another advantage of high concentration is cheaper production. “We are a much lower-cost producer of helium than most,” Marani says. “We drill very shallow wells, probably 1,000 to 1,500 feet deep, low costs and small footprint, and the gas comes out naturally on its own,” he explains.

Africa Supply Point

At a time when global helium supplies are often disrupted, a new player in a different geographic region is very welcome, Ballentine said. “We’re in a supply crisis right now because we only have a few limited supply points… places like Renergen will certainly ease that situation,” he says.

Currently, none of the world’s helium reserves are produced in Africa: helium-rich gas fields are located in Tanzania, but they have not yet been commercially mined.

Marani notes that Renergen’s gas project has been recognized by the South African government as an “integrated strategic project”, which has helped speed up regulatory approval processes.

The company’s “phase one project”, a small pilot project funded by the US government, will produce about 350 kilograms of helium per day, enough to meet all of South Africa’s needs and have a surplus, Mitchell said. Its “phase two project”, which is expected to come online in 2027 and has received funding from the US government and South African Standard Bank, will increase production to 4.2 tons per day, producing 6% to 8% global supply of helium. According to Research and Markets, the global helium market is expected to reach a value of over US$6 billion by 2027, generating significant profits.

Despite the company’s ambitious forecasts, its share price fell significantly in the last quarter of 2023, which experts say may be due to criticism on social media of the company’s transparency. However, Marani is confident that Renergen will be able to overcome investors’ doubts with the achievements, which, according to him, “will not only significantly reduce the risk of moving forward with the project, but will also ensure results.”

In December, the company announced it had sold a 5.5% stake in Tetra4, a subsidiary of Renergen that owns and operates the Virginia gas project, for R550 million ($29 million) to Mahlako Energy Fund and Third Way Investment, two investment management firms , located in Johannesburg. The company plans to raise additional capital through an initial public offering (IPO) on the Nasdaq stock market in the United States. The company is already registered in South Africa and Australia.

“Building trust will take a long time, I have no illusions,” Marani says. “I think helium activation is the first step in that process.”

Eleni Giokos, Michael Cross and Tom Bouchier Hayes contributed to this article.

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