The Virginia Gas Project holds the only onshore petroleum production license in the country.
The Central Energy Fund (CEF) will invest R1 billion in Renergen’s Virginia Gas Project, helping to fund the second phase of project’s development.
The state-owned entity has signed a term sheet to invest the funds in return for a 10% state in the project which is owned by Renergen, an emerging gas producer listed on the Johannesburg and Australian stock exchanges.
The proceeds from the deal will be used to progress development of the second phase of the project. The agreement follows a week after Renergen announced it had entered into a strategic partnership with Ivanhoe Mines in which the Canadian miner may ultimately acquire more than half of the company.
The Virginia Gas Project holds the first and only onshore petroleum production right in South Africa.
Phase one of the project is at an advanced stage with commercial production of both Liquified Natural Gas (LNG) and Helium is expected to commence next month.
Helium has commercial, medical and industrial uses and is in short supply globally. Renergen’s Virginia project holds some of the richest concentrations of the gas recorded globally.
The CEF group is actively seeking investment opportunities to fulfil its mandate to contribute to South Africa’s energy security.
The CEF and Renergen have signed a non-binding term sheet signed for the SOE to acquire 10% of Tetra4, Renergen’s subsidiary company and the 100% owner of the Virginia project.
The deal is subject to a number of conditions and the parties have 141 days to execute binding agreements . If binding contracts have not been executed within this time frame, Renergen said the purchase price will be renegotiated in good faith.
Stefano Marani, CEO of Renergen, said the company’s relationship with the CEF goes back many years and the investment commitment results from long-term discussions between the two.
“Renergen has successfully grown Virginia in a size and scale, highlighted by the growth both of our helium and methane reserves, which have finally reached the critical mass to enjoy CEF’s involvement,” he said. “To sign CEF and Ivanhoe Mines in the space of two weeks as major investors and strategic partners, highlights the significant growth of the company and the critical role Virginia will play in the future supply of clean energy as well as in-demand helium.”
CEF Group CEO, Ishmael Poolo, said the SOE’s participation in the Renergen project is in line with a newly adopted strategy to be a strategic investor in the energy value chain, and to lead the energy security and just transition programme for South Africa.