By Johan Burger and Amit Jain
Natural gas is what Stefano Marani and Nick Mitchell were looking for when they bought gas rights on this 87,000-hectare piece of land in the Free State province in 2012, for just US$1. What they discovered was a reserve of helium gas large enough to fill about 1.4 trillion party balloons. If proven, the reserves would be worth over US$100bn. Conservative estimates puts the gas finding at 920m cubic meters but it is could be as large as 9.74bn cubic metres. That is like hitting jackpot on a lottery bought at a corner store.
The discovery was announced in October 2021 at a site in Virginia, a small town in Free State province of South Africa. Marani and Mitchell had purchased the gas rights on the 187,000-hectare plot of land in 2012 at a throwaway price of US$1. Helium is a by-product of natural gas. Commonly used for blowing birthday balloons, helium plays an important role in producing medical scanners, and superconductors. Super-cooled helium is also an essential component for future space exploration. It can also be used to treat respiratory conditions like asthma and act as a cooling medium for magnets in MRI machines.
The United States is currently the world’s largest producer of helium gas extracting over 68m cubic meters of it every year followed Qatar (51m cubic meters) and Algeria (14m cubic meters). The Renergen find will make South Africa one of the top helium exporters in the world. The firm intends to install 19 wells by early 2022 with a potential daily production capacity of 5 tons accounting for roughly 7% of the total global supply.
Helium is typically found in concentration of around 0.5%. In the US, it is even more rare (0.3%). In the Free State reserves, however, it is found in much more abundant concentrations (2-4%) making its extraction much more cost effective. What makes the new reserve finding even more valuable, is the fact that American reserves are running out. According to Research and Markets, the global helium market is currently worth over US$10.6bn but could grow much bigger in the future and demand increases and reserve deplete.
With helium being as valuable as it is, the find has the potential to significantly boost South Africa’s foreign reserves. It also has the potential to create many downstream value creation opportunities, in addition to many high-level employment opportunities.
Bulk helium prices stood at US$52,438.40/MT in September 2021, up from US$8,059.80/MT in July 2021. This significant rise in price was caused by a steady increase in demand in the Asian market during the third quarter of 2021. One ton of helium translates into 6.25 m3.
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Anon. 2021. Bulk Helium price trend and forecast for the quarter ending September 2021. Chem Analyst. nd. Available at https://www.chemanalyst.com/Pricing-data/bulk-helium-1100. Accessed 23 November 2021.
CBC News. 2016. Huge helium deposit found in Africa. CBC News. 27 June 2016. Available at https://www.cbc.ca/news/science/helium-technique-1.3654909. Accessed 23 November 2021.
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Statista. 2021. Reserves of helium worldwide in 2020, by country. Statista. February 2021. Available at https://www.statista.com/statistics/925805/helium-reserves-worldwide-by-country/. Accessed 23 November 2021.