Last week South African LNG and helium player Renergen (ASX:RLT) announced a helium surprise at its P12 well – which it previously advised would be plugged and abandoned. It’s great timing for the company, with stage one of its helium-rich Virginia gas project expected to kick off in Q4, producing about 350kg of liquid helium and 50 tons of LNG a day at an average concentration of 3.9%. Not to mention it’s coming online when the market is desperately searching for new sources of the vital gas. “The helium market is currently going through a third major crisis, the industry refers to it as helium 3.0,” Renergen CEO Stefano Marani told Stockhead. “The first crisis was around 2012-2013, there was a far bigger crisis around the 2016 mark, but the current one is by far the most pronounced. “The main reason is one of the major suppliers of helium — the strategic reserve in the United States called the BLM — announced in 2018 that they’ve run out of helium. “What the world had gotten used to was a stasis where about 30 to 50% of the world’s helium was literally coming from a strategic reserve, and only half of the world’s helium coming from new sources. “Now that the strategic reserve has run out, it means that there’s a desperate shortfall in terms of new resources coming online.”
What’s the outlook for helium in the next 5-10 years?
“The crisis won’t last forever. We’re predicting that by 2025-2026, with Russia’s Amur project coming online, there should be equilibrium in the market again,” Marani said. “And then probably early 2030-2031, you’ll start to see supply falls short of demand by virtue of the fact that you’ve got additional pressure mounting on natural gas production from a climate change perspective. “Supplying demand is going to be challenging, and I don’t think it’s going to be one of these commodities that will ever be in abundant supply.
“I think there will always be a slight shortage.”
How’s the staged approach to Renergen’s Virginia project progressing?
“The launch of phase one should be complete … with initial gas supply coming on in fourth quarter this year,” Marani said. “With phase two, we’ve been doing all of the necessary engineering studies and we embarked on a drilling campaign for six wells, and we’ve had an unbelievable five-for-six strike rate, which is well beyond our expectations. “The helium concentrations range from 1.9% all the way up to 4.4% which is the highest concentration of helium on the planet. “We’ll probably have a handle on phase two later this year, and then we’ll announce to the market what the updated reserves and resources looks like and what the full extent of phase two looks like from a size perspective.”
What sets the company apart from its peers?
“I think the easiest way to encapsulate it is if you have to launch a Falcon Nine rocket using helium from Qatar, the amount of CO2 that you would produce to launch that rocket works out to 489,000 tons of carbon dioxide for the helium for one rocket,” Marani said. “If you look at our field, it will produce the same amount of helium for 1300 tonnes – that’s what sets us apart. Concentration is everything. “Then of course, it’s incredibly useful having the associated LNG in a country that is in the midst of an enormous energy crisis. “We’ve got major energy issues in South Africa, from rolling blackouts with the power stations to old fuel refineries that are constantly down. “Now we produce LNG as a substitute for diesel in trucks and because the railway industry is all but falling apart over here, we’ve got the 11th largest fleet of trucks on the planet – despite our economy being as small as it is. “So that is a huge opportunity to be substituting diesel with LNG in the trucking market and as a result, we’re capable of selling LNG at about 18 US dollars per gigajoule. “To put that in context, in the US it’s about two or $3 per gigajoules, so there’s a big margin over here on LNG. “Plus, it can’t be imported, and there are no other onshore licenses – so we’ve really got a very big head start over here compared to anyone else.”