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Renergen starts delivering SA’s first locally produced commercial LNG

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JSE-listed Renergen has started delivery of the country’s first domestically produced, commercial liquefied natural gas (LNG) – to Ardagh Glass Packaging, previously Consol Glass, and Italtile subsidiary Ceramic Industries – as part of the first phase of its Virginia Gas Project.

In a statement issued on Tuesday, the company said the LNG will replace LPG (liquefied petroleum gas) at Ardagh Glass’s Bellville operation in the Western Cape and will supplement the pipeline of natural gas supply at Ceramic Industries’ Vanderbijlpark operations. Five-year contracts were signed with both companies.

Both companies are to use LNG as a fuel heat source for their processing plants.

In September Renergen announced that its LNG plant, based in the Free State, was operational. This followed its August announcement that the Central Energy Fund (CEF) would invest R1 billion for a 10% stake in the plant.

Important milestone

“Commercial LNG is now finally a reality in South Africa, and the best part is that it is not imported but rather produced locally, contributing to the country’s energy security,” says Renergen CEO Stefano Marani.

“We are proud to have finally achieved this enormous milestone and grateful to our customers who have decided to walk this journey with us. We look forward to becoming an integral component of their energy system, as we explore future expansion in the supply of domestically produced LNG.”

Renergen says it was required to construct turnkey facilities for both companies and will maintain the LNG equipment and storage facilities at the two sites for the duration of the contracts.

Ardagh Glass Packaging SA CEO Paul Curnow says the company is proud to be an anchor customer of the Virginia gas plant.

“The introduction of domestically supplied LNG to replace imported, more carbon-intensive LPG ticks three very important boxes for us, namely localisation, decarbonisation and energy security.”

Sceptical market

Independent analyst Anthony Clark of Small Talk Daily says despite the one-year delay in the project’s rollout, the progress demonstrates to a “very sceptical market” that when Renergen says it is “producing x or y, it is actually being done”.

“The very fact that two major corporates are taking LNG means that actuality in the project is now occurring and that the market should be a lot less sceptical given that these are long-term contracts [that have been] signed.”

He says both companies confirmed to him that their facilities had been completed and they have been testing the mixing process in the relevant kilns and furnaces. Since that has now been completed, “such deliveries will probably occur every couple of days from Renergen”.

Clark says there is hope that Virginia Phase 2 will attract new customers looking to replace diesel with LNG, particularly in the transportation sector.

The natural gas and helium producer says several large-scale manufacturers, heavy logistics operators and independent power producers have also expressed interest in the project.

“Renergen’s existing operations will be expanded over the next three to four years through the development and construction of Phase 2 of the Virginia Gas Project, which will see the company produce an estimated 680 tonnes per day of LNG and up to one million standard cubic feet of liquid helium per day.”

Listen to Simon Brown’s interview with independent analyst Jimmy Moyaha following the news that Renergen had secured funding for Phase 2 of the Virginia Gas Project: 

Nondumiso Lehutso is a Moneyweb intern.

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