Australia (Common Wealth) _ Kinetiko Energy, an Australian gas explorer that has discovered shallow sandstone gas in South Africa, has begun talks with petrochemical major Sasol (SOLJ.J) on a possible supply arrangement, according to Kinetiko’s (KKO.AX) chief executive.
The natural gas resource in Block 272, Mpumalanga province, near Sasol’s Secunda petrochemical plant, might be a benefit for Sasol, South Africa’s largest gas user and distributor, which is looking for alternate sources of supply.
Sasol now receives almost all of its gas from Mozambique via the Rompco pipeline, but the Pande and Temane onshore fields in Mozambique that feed it are likely to go dry within a few years.
Kinetiko CEO Nick de Blocq told Reuters that the business was in “very early and undisclosed discussions” with Sasol, which he described as the “natural off-taker for any gas produced in our northern block” geographically.
According to a Sasol representative, the company’s CEO Fleetwood Grobler confirmed the extremely early stage conversations, but added that it was “too early to consider details.” On Wednesday, Sasol slashed its final dividend by nearly a third due to a non-cash impairment of 35 billion rand ($1.87 billion) attributable to challenges that threaten Secunda’s post-2030 viability, which produces fuel from coal and natural gas.
Kinetiko has discovered sandstone gas in Blocks 270 and 271 further south, where it hopes to create South Africa’s largest liquefied onshore natural gas (LNG) project. It would first produce gas equivalent to 50 megawatts of power, gradually expanding to 500 and eventually 1,500 MW equivalent.
The idea is to drill a 30-well field first, with each group of ten wells generating roughly 5,000 tonnes of LNG per year, but De Blocq said he couldn’t specify a timetable because the business is awaiting regulatory approval.
Kinetiko, which is listed on Australia’s ASX, is seeking a secondary listing in London or Johannesburg to help finance the LNG project, which is a joint venture with South Africa’s Industrial Development Corporation. Kinetiko Energy, an ASX-listed company, has made a large gas discovery near Secunda in Mpumalanga, subsequent drilling expeditions near Sasol, Eskom, and other industrial gas users’ pipelines.
The discovery is thought to be substantial, but the group would not confirm the scope on Tuesday. In a report to the exploration and production activities regulator Pasa (Petroleum Agency South Africa), it earlier projected five trillion cubic feet of volume across a substantially larger area.
Kinetiko Energy CEO Nick de Blocq verified the gas discovery in its ‘272’ exploration right block (ER272), which adjoins the Secunda area and the Lilly gas pipeline that runs through to Durban, in an interview with Moneyweb.
Due to a temporary halt in trading of the company’s shares on the ASX, De Blocq was unable to confirm the exact extent of the discovery.
He stated that the business concentrated their drilling expeditions on ER272 following the success of gas exploration in the ER271 block, which extends from the north of Amersfoort down to the south of Volksrust. It is also near Sasol’s Secunda pipeline network and several Eskom coal power plants.
Between November 2022 and July of this year, we accessed two additional investigation zones… and I guided the company into expanding the exploration into our newer areas, ER270, which is a roughly curved horseshoe around the Newcastle area [northern KwaZulu-Natal], and ER272, which does abut Secunda, he said. He went on to say that the location, which includes 40 boreholes, had a 100% strike rate.
He described it as “absolutely world-class” in terms of strike rate, geographical extent of the blocks, and gas quality, which is up to 97%/98% methane with only nitrogen. Kinetiko Energy suspended trading on the ASX pending an official statement related to a project update.
