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Kinetiko and Renergen: How Domestic Gas Production can help Mitigate South Africa’s Energy Crisis

By NJ Ayuk

The country’s fuel and energy sector is truly in trouble, with power shortages and blackouts worse than ever before

South Africa is facing an energy crisis on a very large scale. It’s not for nothing that President Cyril Ramaphosa took the unprecedented step of declaring a “national disaster” in February. The country’s fuel and energy sector is truly in trouble, with power shortages and blackouts worse than ever before.

There are some hopes for relief, including efforts to find new sources of fuel for thermal power plants (TPPs).

On the one hand, South Africa possesses large offshore natural gas reserves in the Outeniqua basin and may be able to find more in its section of the Orange basin and elsewhere. On the other hand, it shares borders with other two future gas producers – Namibia and Mozambique, both of which have sizeable reserves and smaller populations than South Africa – that may be willing to export some of their bounty under the right conditions.

Nevertheless, these solutions are still some distance away, given that it will take years to bring gas from these large-scale projects to market.

In the meantime, South Africa should not lose sight of the fact that it has other solutions at hand.

It is true that the solutions I’m talking about are considerably smaller in scale and humbler in nature than the massive projects I’ve already mentioned. They don’t target massive reservoirs in deepwater frontier basins, and they won’t deliver hundreds of thousands of barrels of oil equivalent per day  through multi-billion-dollar investments. But they do have the potential to offer crucial support to Africa’s second-largest economy at a time of severe crisis.

I know of two companies that are in a position to offer this kind of support. Nevertheless, these solutions are still some distance away, given that it will take years to bring gas from these large-scale projects to market.

In the meantime, South Africa should not lose sight of the fact that it has other solutions at hand.

  • Kinetiko Energy: Onshore Gas Supplies to Local Power Stations

One of them is Kinetiko Energy, an Australian company that is working to develop conventional gas reserves in southern Africa. Its primary focus is the Amersfoort-to-Volksrustregion, which focuses on a large gas deposit in the Mpumalanga province, southeast of Johannesburg. Kinetiko is still working to determine exactly how much gas its licenses contain, but it is optimistic in light of the fact that the area has long been known to hold very high-quality methane in shallow sediments and coal-beds, and it has estimated its 2C resource at 4.9Trillion cubic feet.

On January 30, 2023, the company issued a statement extolling the “record breaking” results achieved from a new core well, 271-23C, during logging and core-sample testing after the completion of a three-well drilling program. The statement included some insights into the well’s geology, but it also quoted Kinetiko CEO Nick de Blocq as saying that 271-23C was in a favorable geographic location. Specifically, he drew attention to the well’s position in Block ER271, close enough to the Majuba TPP to represent a field which could supply it with gas in addition to coal, its usual fuel.

Meanwhile, de Blocq also drew attention to 270-03C and 270-06C, the other wells drilled during the three-well drilling campaign. He pointed out that the Lily Pipeline runs through all of Kinetiko’s current blocks, including Block ER270. This is South Africa’s largest gas conduit, which transports (primarily Mozambican) gas from Sasol’s Secunda plant to coastal cities and to industrial consumers in the KwaZulu Natal region. “The proximate location of our southernmost boreholes in ER270 to the steel-smelting and manufacturing centre of Newcastle could mean a simplified logistical solution to get the gas to an increasingly hungry thermal industry market,” he stated.

Of course, it is true that Kinetiko is still working to finalize its plans. It has yet to determine exactly when it can begin commercial production, having started the activities required to evolve their Exploration Right into a Production Right, and it is busy negotiating with midstream players who bring downstream offtakers and financing. But it is optimistic about its ability to launch small-scale development quickly — and about its ability to make a local power-generating entity one of its very first clients. This is the sort of initiative and drive that has the potential to benefit South Africans greatly on a local level while larger-scale solutions come together, and I hope to see more of it.

INDEED, IF SOUTH AFRICA WAS WILLING to take steps to open up more of the onshore basins that might hold gas — such as the Karoo basin— it would be giving investors a signal that it was ready to entertain new solutions to a problem that has persisted for far too long.

Of course, when I call for new solutions, I don’t mean it’s time to give free rein to polluters and forget about environmental concerns entirely. If South Africa is going to develop an onshore gas industry, the government ought to be making plans to develop the regulatory regime accordingly, and investors ought to be keeping environmental concerns front and center as well.

But there’s good news: Some of them are already doing so.

(2) Renergen: Demand for Gas Beyond Power Generation

And that brings me to my second example: Renergen, the native South African company that is carrying out the Virginia gas project.

Renergen has been working to develop three conventional gas fields in Free State – Theunissen, Virginia, and Welkom, which are collectively estimated to hold nearly 407Billion cubic feet  of conventional natural gas in proved and probable (2P) reserves. It is keen to monetize these fields because they contain relatively high levels of helium — a commodity that is both valuable and rare — as well as gas. As such, it has worked to transform its initial compressed natural gas (CNG) initiative into a larger-scale and considerably more ambitious liquefied natural gas (LNG) project.

In September of last year, Renergen started up its onshore gas liquefaction plant, becoming South Africa’s very first producer of LNG. The company touted its environmental credentials in a Twitter post announcing the launch, noting that the plant’s output would help reduce the country’s carbon footprint by making a new type of fuel with lower emissions intensity than diesel available for trucking and other commercial uses. It was referring to a deal signed in the summer of 2020 with Total South Africa, a subsidiary of the French major TOTALEnergies on joint marketing and distribution of LNG. Under that deal, Renergen agreed to deliver some of the LNG from the first phase of its plant to Total-branded filling stations along the N3 road, a major highway connecting Durban and Johannesburg, for sale as a long-haul trucking fuel. It also pledged to make more LNG available for distribution and sale via Total stations along other key highways once the second phase of its plant came online, saying that expanding the use of LNG in the road freight sector would help curb the rise in carbon emissions.

But Renergen has not confined its efforts to transport. It has also targeted industrial customers, and in August 2021 it signed a five-year supply agreement with Ardagh Glass Packing (previously known as Consol Glass), a supplier of glass packaging materials based in Johannesburg. Then in February 2022, it followed that with another five-year deal — this time, with Ceramic Industries Group, based in Vereeniging. Both Ardagh and Ceramic Industries are subsidiaries of Italtile, based in Cape Town; Ardagh has said it intends to use the LNG to replace liquid petroleum gas (LPG) at its Belville operation in the Western Cape area, while Ceramic Industries will use LNG to supplement the gas supplies it receives via pipeline. Renergen made its very first shipment of LNG to Ardagh’s Belville site in December 2022 after setting up turn-key delivery facilities per the terms of its contract.

At that time, the company said it had received expressions of interest in its LNG from multiple South African businesses, including independent power producers (IPPs), large-scale industrial manufacturers, and heavy logistics operators. It did not name any potential new clients, and since then, its efforts to drum up new business may have been overshadowed by the escalating energy crisis.

Nevertheless, Renergen’s efforts to establish a foothold in the industrial and transport sectors are important. They demonstrate that there is ample room for natural gas in South Africa – that there are opportunities for gasification in the country that are not confined to the power-generating sector.

Yes, South Africa urgently needs gas to help resolve its energy emergency. Gas will help South Africa find ways to produce the additional electricity it needs to provide all of its citizens with reliable and secure power — both in the longer run as new offshore fields come online and in the shorter term as companies such as Kinetiko and Renergen develop onshore resources.

But South Africa could also use gas for other purposes. It could use gas as a substitute for diesel in long-haul trucking — and thereby reduce emissions in the transport sector. It could introduce LNG as a fuel for industrial customers — and thereby reduce emissions in that part of the economy, while also reducing the drain on the national transmission grid. It could create markets that can be sustained and made profitable even beyond the time when (I hope) the current crisis will be nothing but a memory.

Let us give South Africa’s smaller-scale gas producers a chance to grow.

NJ Ayuk is the Executive Chairman of the African Energy Chamber (www.EnergyChamber.org) and Author of “A Just Transition: Making Energy Poverty History with an Energy Mix”.


Gas Exporters Meet in Cairo

The 24th Ministerial Meeting of the Gas Exporting Countries Forum GECF is being held on the 25th of October 2022, in Cairo, the Arab Republic of Egypt.

Tarek El Molla, the host country’s Minister of Petroleum and Mineral Resources, will chair the Meeting in his capacity as President of the GECF Ministerial Meeting for 2022.

The Ministerial Meeting is the supreme governing body of the Forum and meets once a year in accordance with the GECF Statute.

The GECF was established in 2001. In 2008, it was transformed into an international governmental organisation headquartered in Doha, the State of Qatar.

“Energy security and affordability have moved to the top of the priority list of policymakers, with sustainability taking a backseat”

The GECF comprises of 19 member countries, with Algeria, Bolivia, Egypt, Equatorial Guinea, Iran, Libya, Nigeria, Qatar, Russia, Trinidad and Tobago, and Venezuela as Members, and Angola, Azerbaijan, Iraq, Malaysia, Mozambique, Norway, Peru, and the UAE as Observers.

Together, they represent 72% of the global proven natural gas reserves, 43% of marketed production, 55% of exports by pipeline, and 50% of LNG exports.

Mr. El Molla has promised, as host and chair, “to provide a constructive dialogue that will contribute to fulfilling the objectives of the Forum and all its member countries while focusing on the future role of natural gas in the energy transition process as a reliable and affordable source of energy.

“Energy security and affordability have moved to the top of the priority list of policymakers, with sustainability taking a backseat”, observes Mohamed Hamel, Secretary General of the Gas Exporting Countries Forum. “Another energy crisis, that faced daily by three billion people lacking access to modern energy services, continues unabated and has even worsened. Furthermore, the IPCC Sixth Assessment Working Groups’ reports have once again underlined the urgency of mitigation and adaptation to climate change”.

Mr. Hamel, who is Algerian, notes that Natural gas markets are going through a rapid and substantial restructuring in terms of physical flows, investment, and contractual arrangements. From being the market of last resort, Europe has become the preferred destination for LNG cargoes. In the event, “some developing countries are no longer able to satisfy their gas import needs, a situation that creates economic havoc, lowers the standard of living of their people, and gives rise to political and social instability.

“Against this backdrop, the 24th GECF Ministerial Meeting is a great opportunity to exchange views, and explore ways and means to strengthen the Forum and expand its membership. It is also an opportunity to reemphasise the crucial role of natural gas in sustainable development, and as an enabler of the energy transition – a transition that is smooth, cost-effective, just, and leaves no one behind”, the secretary general declares.

“It is all the more a great opportunity that the 24th GECF Ministerial Meeting is held in Cairo, the Arab Republic of Egypt, a very important country for natural gas markets, with a thriving, dynamic and innovative industry.  It is also a wonderful coincidence that Egypt is set to host COP 27 in Sharm El Sheikh in 2022”.


Savannah Agrees to Deliver a Trickle of Gas to Axxela 

British gas producer Savannah Energy has agreed to supply a maximum of five million standard cubic feet per day (5MMscf/d) of gas to Axxela, a Nigerian ‘last mile’ gas distributor.

The gas will be delivered via Savannah’s Ikot Abasi Gas Receiving Facility in southeastern Nigeria and then via third-party gas infrastructure to Central Horizon Gas Company CHGC, a majority-owned subsidiary of Axxela in the Port Harcourt, the commercial hub in the east of the country.

Axxela supplies natural gas to over 185 industrial and commercial customers via its gas infrastructure network across cities in Southern Nigeria including Lagos and Port Harcourt.

CHGC operates a 17km gas pipeline infrastructure network with a throughput capacity of 50 MMscfpd, which provides natural gas to industrial and commercial customers in the Trans Amadi Industrial Area of Port Harcourt as well as the Greater Port Harcourt Area. 

The Gas Sales Agreement, GSA is initially for one year but is extendable by mutual agreement. First gas deliveries are expected to commence within the next 12 months and are dependent on CHGC completing certain works to connect to the third-party gas delivery infrastructure. Accugas is not expected to incur any additional capital expenditure in this regard.


Why Aje Field Cannot Yet Supply Gas to Lagos

It would seem a no-brainer that the Aje gas and condensate field, which reached first oil in May 2016, should have advanced to the stage of supplying natural gas to Lagos by mid-2021.

The field is strategically located 24 kilometres offshore Lagos where it should benefit from increasing local energy demand, particularly for gas which is viewed as a replacement fuel for diesel and commands a premium.

“But gas projects take…Read more…        


TOTAL Reopens Office in Gas Rich Cabo Delgado

TOTALEnergies has opened an information office in the city of Pemba, in the gas-rich Cabo Delgado Province in Mozambique.

With this move, the company is gradually effecting a return, nine months after suspending its activities in the Afungi Peninsula, after an Islamist militant attack in the nearby town of Palma in March 2021, in which dozens of people were killed.

Afungi Peninsula is the site of TOTALEnergies’ proposed 13Million Tonnes Per Annum Liquefied Natural Gas LNG plant. 

The new information office in Pemba is 125 kilometres south of the Palma district.

A multinational force comprising troops from Rwanda and soldiers from countries in the Southern African Development Commission (SADEC) region has repelled the insurgents from many of their bases in the province, but the rebels have spread out and now conduct guerilla-style attacks. 

The office is expected to ease communication between interested parties in the LNG project.


LNG Supply: Turkey Pivots from Nigeria to Egypt

Seven Egyptian Liquefied Natural Gas cargoes have been shipped to Turkey since October 2021, the same month that the latter country ended its contract with Nigerian LNG.

There are no indications that Botas, the Turkish state hydrocarbon company with which NLNG signed the expired contract, has a contract with Egypt.

Turkey and Egypt re-established formal diplomatic relations in early 2021, almost eight years after they were broken off following the military coup that ousted Egypt’s first Islamist president Mohamed Morsi.

An S&P Platts Global report declares that Botas has held a number of tenders for spot LNG cargoes in recent months, and is believed to have secured some supplies although exact volumes and delivery dates are not clear.

“Turkey is set for record high gas demand in 2021 — of as much as 2 Trillion Cubic Feet — on the back of strong consumption in the power sector, and”, the S&P Platts report adds…” …it is facing the prospect of more of its long-term import contracts expiring in the near future …with one long-term LNG contract in place — with Algeria’s state-owned Sonatrach — that is due to run until 2024, but otherwise has been taking cargoes mostly from the US and Qatar”.


Egypt’s LNG Exports in Full Throttle

By Toyin Akinosho

Egypt is capitalizing on the surge in natural gas prices overseas by exporting the equivalent of around 1.6Billion cubic feet per day (1.6Bcf/d), from its two LNG Terminals. 

“Egyptian gas has played a role in securing Europe’s energy needs … The liquefaction units are now operating at full capacity as we try to maximize our natural gas exports in light of the rise in international gas prices,” Tarik El Molla, the country’s Minister of Petroleum, said on the sidelines of the East Mediterranean Gas Forum ministerial meeting in Cairo.

At least 75 LNG shipments have been shipped so far in 2021 — a huge jump after having only shipped 24 during the whole of last year. As of the second week of November, more than eight gas shipments had departed from Egypt in 4TH Quarter 2021., data from S&P Global Platts indicate.

Egypt’s gas production fortunes slumped in the early to mid-2010s while domestic consumption rose, forcing the country to halt LNG export.

But in late 2015, ENI discovered Zohr, the giant gas field (> 22Tcf), in the deepwaters of the Mediterranean and gradually reclaimed its role as a net exporter of LNG. The country’s total natural gas output currently ranges between 6.5 and 7Bcf/d, Mr. Molla told the EMGF ministerial meeting.


Golar & Partners to increase Cameroon’s LNG Production to 1.4MMTPA

GNL Golar and its partners Perenco and the National Hydrocarbons corporation SNH plan to increase floating LNG plant Hilli Episeyo’s yearly production capacity from 1.2Million to 1.4 Million tons in 2022. 

The plant monetizes gas from the Sanaga Sud field, in MLHP-4 Block in the offshore area of the central Douala Basin. 

Commissioned in 2018, FLNG Hilli Episeyo has 2.4Million tonnes of liquefaction capacity. 

Golar says that the plant has delivered 100 percent commercial uptime since first gas in 2018.

According to the agreement binding the parties, Perenco and SNH have the option to increase the production capacity by an additional 200,000 tons yearly from January 2023 to 2026, which marks the end of the current contract. 

Should the parties decide to go this route, they will confirm it in Q3-2022.

Perenco and SNH intend to assess the potential of two to three additional gas wells and start drilling them this year in a bid to increase the upstream capacity in 2022 in preparation for the production.


Coral-Sul FLNG Begins Sail Away from South Korea to Mozambique

Italian operator ENI has held the naming and sail away ceremony of the Coral-Sul floating LNG (FLNG) at Samsung Heavy Industries shipyard in Geoje, South Korea.

The FLNG, which is part of the Coral South Project, will be now towed and moored at its operating site in the Rovuma basin offshore Mozambique. Production startup is expected in the second half of 2022, and it will contribute to increasing gas availability in a tight market.

FLNG treatment and liquefaction installation has a gas liquefaction capacity of 3.4Million tons per year (MTPA) and will put in production 450Billion cubic metres of gas from the giant Coral reservoir, located in the offshore Rovuma Basin.

Partners, with ENI, on the project, include ExxonMobil, CNPC, GALP, KOGAS, and ENH. The event took place, in the presence of the Mozambican President, Filipe Jacinto Nyusi, and Moon Jae-in, President of the Republic of Korea.

The Coral South Project achieved Final Investment Decision in 2017, only 36 months after the last appraisal well. “FLNG fabrication and construction activities started in 2018 and were completed on cost and on time, despite the pandemic”, ENI says in a statement. While performing the construction activities in Korea, several significant activities were undertaken in Mozambique, with full support from the Mozambican Authorities, including the ultra-deepwater (2000 metres water depth) drilling and completion campaign that involved the highest technological and operational skills and equipment.

“The Coral South Project will generate significant Government takes for the Country while creating more than 800 new jobs during the operation period.

“The Coral Sul FLNG is 432 metres long and 66 metres wide, weighs around 220,000 tons, and has the capacity to accommodate up to 350 people in its eight-story Living Quarter module. Once the FLNG facility will be in place, the installation campaign will begin, including mooring and hook-up operations at a water depth of around 2,000 metres by means of 20 mooring lines that totally weigh 9,000 tons.

About Area 4

Area 4 is operated by Mozambique Rovuma Venture S.p.A. (MRV), an incorporated joint venture owned by Eni, Exxon Mobil, and CNPC, which holds a 70 percent interest in the Area 4 exploration and production concession contract. In addition to MRV, Galp, KOGAS, and Empresa Nacional de Hidrocarbonetos E.P. each hold a 10 percent interest in Area 4. ENI is the offshore Delegated Operator and is leading the construction and operation of the floating liquefied natural gas facility on behalf of MRV.


Cameroon Will Import 120,000MT of LPG in 2021

Cameroon’s Bipaga Liquefied Petroleum Gas (LPG) plant, owned and operated the country’s National Hydrocarbons Corporation (SNH), supplied 25,092 metric tons (MT) of LPG to the local market in 2020, representing 16.93% of the national supply, according to SNH data. 

In 2021, this supply could rise to 34,000 MT, due particularly to the optimization of the natural gas (from Sanaga Sud) treatment process, the SNH adds. 

But the country consumes around 150,000MT per year.

Since Cameroon became a natural gas producer in 2018, then it has been processing part of its production to supply households. 

The Bipaga LPG depot, indeed, was commissioned in the same year. However, its production is currently unable to meet local demand. So, the country resorts to imports to fill the gas demand. For instance, to cover the needs this year, the country plans to import 120,000 metric tons of domestic gas.

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