With energy security crucial for South Africa’s future, the gas projects of Kinetiko Energy Ltd (ASX:KKO, OTC:KKOEF) are set to significantly reduce reliance on coal and imported energy sources, contributing to a cleaner, more reliable energy mix.
Kinetiko is developing shallow conventional gas projects as part of its energy transition strategy with the flagship Mpumalanga Project primed to deliver substantial volumes of gas to help alleviate the country’s energy challenges.
In the company’s annual report executive chairman Adam Sierakowski said that the past 12 months had been transformative for Kinetiko as it continued “to advance our vision of delivering energy security to South Africa through the commercialisation of shallow conventional gas projects in the Mpumalanga Province”.
Successes in FY24
The company has been focusing on drilling and coring campaigns in its key blocks, ER272 and ER270, achieving significant milestones.
In block ER272, Kinetiko completed a six-borehole coring campaign, consistently striking gas in all drilled wells. The block showed an average gas cut of about 90% in the logged sub-igneous stratigraphy, with an average of 128 metres of pay per hole.
In block ER270, core hole 270-08C near Memel marked Kinetiko’s deepest well at 745 metres, which revealed substantial gas-bearing intervals.
Subsequent drills at core holes 270-12C and 270-11C also showed promising gas-bearing geology, supporting the potential for multi-field development and further boosting confidence in the consistency of gas reserves across the company’s acreage.
Resource increases
Sierakowski said: “Our successful drilling and gas flow testing results resulted in the company increasing its contingent gas resource 2C to 6TCF and obtaining a maiden gas reserve 2P of 6.4BCF.
“This also enabled strong strategic partnerships with the Industrial Development Corporation (IDC) of South Africa to be developed and with regional exploration success in every well drilled, positions Kinetiko to be a key player in South Africa’s energy transition.”
The reserves, assessed over a pilot gas production field of less than 7 square kilometres on a 30-well cluster, are underpinned by positive economics from an IDC joint venture.
The maiden reserves represent less than 0.2% of subsidiary Afro Energy’s granted rights and application areas, indicating significant potential for future gas reserve increases.
Commercial viability
In May 2024, Kinetiko, in partnership with its Gas-To-Power proof of concept partner, FFS Refiners, demonstrated power production from a gas well at Amersfoort using a 1.2MW gas generator.
This pioneering demonstration validated the commercial viability of the company’s high-quality natural gas and during flow periods, the calibrated gas quality meter measured close to 99% methane and 1% nitrogen.
Kinetiko plans to leverage this success by developing a producing LNG facility from this specific field.
Next 12 months “critical”
The chairman said the next 12 months would be critical for Kinetiko as it transitioned from exploration to development of production-focused activities.
“The commencement of the five-well production test program in Q4 2024 will provide essential data to refine our production models, secure stable gas flow rates for commercial production and increase the potential to substantial increase gas reserves certification.
“Kinetiko is advancing its Production Right application for block ER271 by working with environmental experts to develop an Environmental Impact Assessment (EIA).
“The company also has an ongoing application for ER383, covering 2,383 square kilometres across the Freestate and Mpumalanga provinces, which is expected to enhance its gas resources once granted. Regulatory approval granting ER383 is anticipated by mid-2025.”
ESG initiatives
“We are committed to operating with the highest standards of environmental, social and governance (ESG) practices,” Sierakowski said.
“Our drilling operations are conducted with minimal environmental impact and we prioritise local employment, having engaged South African contractors and suppliers across all of our operations over many years.
“No accidents, injuries, health or environmental incidents were reported during the financial year, with safety meetings conducted before each shift at the well site.
“By year-end June 2024, the company recorded 17,220 person-hours (measured at the worksite only) without any reportable safety incidents.
“We continue to make progress on our environmental impact assessments (EIAs), ensuring all of our activities align with stringent regulatory and community standards,” he added.
In conclusion, the chairman said: “These initiatives enable Kinetiko to be well-positioned to deliver its first LNG production cluster within the next 18 months, along with significant upgrades to gas reserves and the development of strategic partnerships to bring multiple gas production clusters online for many years to come."