Alternative-energy company Renergen, which is listed on the JSE’s AltX board, announced on Tuesday that it planned to acquire 90% of gas exploration and development company Molopo from Windfall Energy in a deal valued at R650-million. The remaining 10% of the company would be retained by Cheryl Sjoberg, Molopo’s black economic–empowerment shareholder.

Molopo holds onshore production rights covering 187 000 ha in the Free State, as well as additional exploration rights in both Free State and Mpumalanga provinces.

Proven reserves in the production-right area had been signed off by Venmyn Deloitte and Renergen reported that they had a net present value of around R2.2-billion.

CEO Stefano Marani told Engineering News Online that a reserve of 27-billion cubic feet of gas had been proven, which translated to a diesel equivalent of about a billion litres. However, the property remained prospective, with probable reserves currently estimated at around 250-billion cubic feet.

A total of ten wells had been drilled across the property, which traversed several farms and mines and the wells had since been capped ahead of the production phase.

Renergen expected to begin small-scale production in the first half of 2016 and ramp-up output as and when it had secured the environmental authorisations required to increase output.

The company was initially planning to invest about R25-million to process the gas into compressed natural gas (CNG) for sale to localised transport companies keen on converting their vehicles from diesel to CNG.

In the longer-term, though, Renergen would also consider producing electricity and helium. However, Marani said that a more capital-intensive phase would be contingent on it securing additional capital.

Gas compression would initially take place at the wellhead, but a centralised processing facility would eventually be developed to allow for reticulation across numerous wells. About 10 000 l of diesel equivalent would be produced during the start-up phase.

The acquisition was also viewed as a company maker, with Marani explaining that the transaction would convert Renergen from its current status as a special purpose acquisition company into an operating entity.

Marani was particularly enthused by the prospect of Renergen holding the “only onshore petroleum production right granted by the Department of Mineral Resources” to date, which he felt gave Molopo a major advantage in rolling out its business plan.

It had also agreed to a farm-in by PetroSA, which would take a 10% stake.