From the West to the South - as the global dependence shift continues, oil and gas explorers are among the companies making strides in securing the bag for future growth and a position in the global supply chain.
While countries seek supply alternatives, we look into two exploration companies that recently secured deals for future projects as they explore African countries to play a part in stabilizing rising energy prices while contributing to global and neighboring-country supply.
Renergen Limited (RLT)
Renergen is a liquefied natural gas (LNG)/natural gas exploration company exploring the South African Free State province. According to the company, helium reserves in the area amount to at least 9.74 billion cubic meters, valued at around $100 billion. To put it into context, helium is a product of natural gas, which can be treated as a separate asset on its own, once separated from LNG. Helium is not produced in many countries. Further, unlike the standard extraction of natural gas, which includes a complex process, a special case presented itself to Renergen; "Our rock has already cracked; there's a giant fracture underground. And so when we drill, we're drilling just into that giant fracture where the gas is, and then the gas escapes naturally with no stimulation at all," Renergen CEO Stefano Marani explained.
During the 2022 Calendar Year (CY22), as conflict continues to spotlight exploration companies, Renergen secured funding for its Virginia Gas project through a placement offer to Ivanhoe of 5.6 million shares at R35.65 per share. This enabled the company to raise approximately R200 million or AU$18.3 million. The company said that the "Investment by Ivanhoe highlights the excellent growth of Renergen and significant and exciting opportunity for the Virginia Gas Project to become a globally significant LNG and helium producer."
"This major transaction is a landmark deal for Renergen and one that recognizes strong synergies with our new partners, Ivanhoe," Stefano added.
Following the placement offer, Renergen further announced that it has entered into an agreement with a state-owned investment fund, Central Energy Fund (CEF). As part of the deal, CEF is expected to invest up to R1 billion in the South African gas company, Tetra4.
Stefano 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."
Currently, the company uses the gas it extracts as compressed natural gas "in a pilot project to run buses", the company explained. Renergen ended its quarter in November 2021 with a cash balance of R75 million.
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Oil and Gas
Invictus Energy Ltd (IVZ)
Aside from a scarcity of natural gas, which is not produced by many countries, for oil, the oil embargo against Russia has brought about uncertainties regarding future imports from the West.
Exploring both oil and gas is Invictus, an exploration mining company repositioning itself in Zimbabwe through the Muzarabani-1 and Basin Margin exploration programs. By March 2022, Invictus' exploration program increased its Special Grant 4571 (SG 4571) license to more than 700k hectares. The company has an exploration program in the Cabora Bassa Basin - which is believed to be rich in oil and gas, while two drilling programs in Muzarabani are expected to commence in June 2022.
During the period, the company also entered into a Petroleum Product Sharing Agreement (PPSA) which, "… contains the fiscal provisions of the project, including the Republic of Zimbabwe's profit/ product share, and takes effect following commencement of the production phase of the project," the company said.
Subsequent to the agreement, Invictus further executed its binding heads of agreement with the Sovereign Wealth Fund of Zimbabwe. "This will provide a robust framework to facilitate long-term investment in the oil and gas sector with confidence and ensures the country derives its fair share of any discovered resources," Invictus managing director Scott Macmillan said.
"The company is also delighted with the approval of the expanded acreage in SG 4571, which substantially increases our footprint more than sevenfold to 709,300 hectares... expanding the forward work program to drill a second well in addition to the Muzarabani prospect in the upcoming June 2022 drilling program, which if successful could be transformational for the company and for the Republic of Zimbabwe".
According to Invictus, the company expects to produce at least 247 million barrels of conventional gas through the SG 4571 Muzarabani exploration. In terms of finances, despite the net loss that occurred during the year - mainly influenced by share-based payments; the company also raised $3.5 million through a placement offer of 35 million shares at $0.10 per share. This was followed by a share purchase plan that enabled the company to raise an additional $4 million by late January 2022. Invictus' cash balance by the end of the 2021 financial year (FY21) was AU$1 million, compared to AU$934 043 in the previous comparative period (PCP).
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What we’re seeing is what I like to refer to as global ping pong games 🏓– where the global economy remains uncertain about energy supply, as politicians take back and forth decisions, especially during the current political tensions in the West.
The global pandemic, together with the conflict in the West, has taught the world that "dependence on one source of supply" may disrupt future production and supply. This may influence more companies to start seeking alternative supplies to avoid further disruptions that may come into play as economic sanctions on one of the world’s largest oil and gas exporters take effect.
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Sources – EasyResearch, Invictus Energy Ltd, Renergen Limited, AllAfrica.
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