BNIC#1 Don Ncube: SA’s gas treasure, a game-changer for energy and the economy

In his keynote session at BNIC#1, Don Ncube reflected on South Africa's untapped gas potential

Published on:

03 Oct 2024, 12:48 pm

In his keynote session at BNIC#1 in Hermanus, entrepreneur Don Ncube reflected on South Africa's untapped gas potential, discovered in Mpumalanga, KZN, and the Free State. Ncube said that this resource could address load shedding and transform the energy sector. Environmentally conscious extraction methods and strategic partnerships aim to boost jobs, economic growth, and energy security for the nation.

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Edited transcript of Don Ncube's keynote address at BNIC#1 in Hermanus ___STEADY_PAYWALL___
Thank you very much, Alec. Good afternoon, ladies and gentlemen. Alec, you're addressing me in borrowed robes. I'm just an ordinary guy from the ghetto. I see they've got a slide here that says "Afro Energy SA Gas." I just want to make a correction. The slide isn't moving, and it's actually him who is the founder and executive chairman of that company.

So I'm going to start by telling you a story. The reason why is that I've been sitting here and learned a lot today. I haven't been to a conference in maybe 20 or 30 years because I was avoiding them. I thought there were so many of them, and they often felt like just talk shops—people speak, they clap, and then nothing happens. So, I thought, "No, I don't want to be part of that."

But let me tell you a story because I realized that most of the people here don't actually know much about gas. They know about minerals—gold, diamonds, and coal—but not hydrocarbons. I worked for Anglo American for 22 years with a man named Graham William Burrett. We built power stations, and most people know about that. But hydrocarbons? No.

Today, I learned a new word—Lollapalooza—and I think what we're about to discuss is exactly that. So, I'll just go over my notes quickly, and then we can have a dialogue. Hopefully, from that, we'll reach what people call "sufficient consensus" about where we go from here—co-vardis, as they say. So, let's do that.

Thank you very much, my brother, for inviting me. When you called me in June to ask if I'd speak about gas opportunities in South Africa, I accepted—mainly because it was you, since we were together in Indaba with your wife, Janet, and that brought back good memories. But more importantly, I thought this was a great opportunity for me to talk to potential investors about our nascent gas exploration project.

In my presentation, I'll talk about the challenges, the risks, and the journey my colleagues and I took to discover natural gas in South Africa. This isn't about empty promises or pie-in-the-sky ideas; it's about actual performance and a track record.

South Africa is rich in mineral resources—gold, diamonds, coal, manganese, nickel, and so on—but not hydrocarbons like oil and gas. So, when people hear about the discovery of gas, they wonder why it wasn't found until 2011. They're even more puzzled when they learn that someone like me, a native boy from the squalid ghetto of Alexandra Township, discovered it. It's mind-boggling to some.

In 2005, Norman Lowenthal, a prominent businessman—he might have been the chairman of the JSE at one point—invited me to his office. There, he introduced me to two Americans: Brian Hughes, a petroleum engineer, and Paul Tromp, a petroleum geologist. They wanted to understand something they found puzzling—what we call BEE (Black Economic Empowerment).

Norman said, "Don knows about this," so I met with the Americans, and they told me about a potential gas resource in Mpumalanga. Interestingly, Alec, it's in Newcastle, where you grew up. I bet you didn't know, when you were young, that beneath your feet was a huge gas deposit with global potential.

I didn't know either, Alec. I told them, "I don't know what you're talking about," but they invited me to the U.S. to educate me. They took me to a place called Powder River Basin, one of the largest CBM (coal-bed methane) gas deposits, where I saw thousands of gas wells and an extensive pipeline network. I was overwhelmed.

When I returned, Brian and Paul helped me establish a company called Badimo Gas—Badimo means "the gods" in Sotho. We applied for mineral rights. Paul, who used to lecture at the University of Zimbabwe, believed South Africa had gas deposits trapped in sandstone formations. So, we applied for petroleum rights and submitted our application to the Petroleum Agency of South Africa (PASA).

At that time, no one knew what to do with a natural gas application. The government was confused, telling me to take it to Eskom or Exxaro, which made no sense. Fortunately, I met Pumzile, the Minister of Mineral Resources at the time, who directed me to PASA in Cape Town. Eventually, we were granted four licenses near Majuba power station and close to a dedicated pipeline.

We consolidated those four licenses into two. We drilled in Amersfoort and Volksrust, and by 2011, we began finding gas. Importantly, we did this without fracking or blasting the earth. The gas we found was in shallow deposits—no chemicals were involved.

By 2013, after drilling several wells, we were told by experts that we had around 2.4 trillion cubic feet of gas in place. That's a substantial discovery.

In 2016, a mining company, Sibanye Gold, became interested in our gas discovery, recognizing its potential as an alternative energy source amidst load shedding issues. They hired Venmyn Deloitte to conduct an independent evaluation of our gas resource, which ranged between 2.4 and 7 trillion cubic feet with varying degrees of certainty.

Although Sibanye didn't invest in the project, they paid for the report, which confirmed the significant potential of our resource. We continued to consolidate our licenses, and by 2023, we restructured Afro Energy. Kinetiko, an Australian company, took over ownership, though my colleagues and I remain involved.

What saddens me is that most of the investors in this asset are Australian, not South African. But I don't blame my fellow South Africans—they didn't know about this, and I hadn't spoken publicly about it until now.

The gas discovery in Mpumalanga, KZN, and the Free State is a game-changer with enormous potential for South Africa. It could have a huge impact on the lives of our people.

Sure! Here's the continued, revised version of the transcript for spelling, grammar, and clarity:

What excites me about this discovery is that it's located close to the energy grid infrastructure. This makes it feasible to integrate gas into the national energy mix, addressing our country's current energy challenges. You all know that load shedding is a major issue in South Africa. We've got the potential to mitigate that with this resource.

One thing I must emphasize is that we have been very environmentally conscious throughout this journey. Our exploration and drilling techniques are non-invasive. We haven't engaged in fracking or any activities that could harm the environment. We're extracting gas in a responsible way, ensuring that future generations will benefit from this natural resource.

In conclusion, I want to say that Afro Energy, in partnership with Kinetiko, is committed to harnessing this gas resource to transform the energy landscape in South Africa. This is not just about profits. It's about creating sustainable jobs, driving economic growth, and ensuring energy security for our country. I believe that the gas discoveries in these regions will play a pivotal role in achieving these goals.

So, ladies and gentlemen, I urge you all to look closely at the potential of this natural gas resource. It is a game-changer not just for the energy sector, but for the entire economy. We have a unique opportunity here, and it's one that we must seize for the benefit of all South Africans.

Thank you very much for your time and for this platform. I look forward to engaging with you further on this exciting journey. Let's work together to make this vision a reality.

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Edited transcript of the Q&A session with Don Ncube at BNIC#1 in Hermanus

Alec Hogg:
Of the 38 wells drilled, 100% are hydrate. What's the average for exploration around the world? I understand it's about 10% if you're lucky.

Don Ncube:
You know, one of the things I always strive for in life is to under-communicate and over-deliver. When I was in real Africa, we had a policy: we don't believe in our own hype. Sorry, Alec, but if I may speak freely—this is global, and of course, they're basing it on independent evaluators' reports.

There are several independent evaluators who've done this, like Venman, Deloitte, Gustafson, and RISC. None of them have anything to do with me. The reports show that this is a gas field, not like Timane and Bande, where you drill 1.5 kilometers deep. Here, every well we drill finds gas because it's in dolomite, so we're talking about a gas field. But I'm not promising we'll be like Shell or Anadarko. We're just looking to contribute by finding local gas onshore, which will serve us for the next 20 to 50 years.

Alec Hogg:
To put it into context, you're talking about two and a half trillion cubic feet (TCF). What does that mean?

Don Ncube:
My colleague, who's a finance guy, mentioned that the range is between two and seven TCF. To give you an idea, Katya, which has the biggest gas field in the world, measures into the hundreds of TCFs. Ours is about 15 TCF. It's significant, but it's all about making a contribution. Remember, gas is continuous, and that baffles some in the South African government. They see it as recolonization when I talk about expanding from Messina to Valcom, Amersfoort, and beyond. This gas could've moved over millions of years and settled here, but I'm not making any promises. What I've found is real, but I still have decades of work ahead to explore fully.

Alec Hogg:
So, how can we understand the full potential of this? Where do we start researching what's in the ground here in South Africa?

Don Ncube:
We've restructured the asset here in South Africa, and our investor, an Australian listed entity, has already put money in. You can look up some of the results online. We recently returned from the U.S. to research cryogenic boxes for LNG and compressed natural gas. And Alec, I was supposed to play golf with you tomorrow, but I've just been informed that I have a meeting with the Petroleum Agency of South Africa to submit our production right application. That's a 30-year right.

Alec Hogg:
There's a lot of interest, but when will you be able to start delivering gas? Who will buy it, and are you sure the market will still be there?

Don Ncube:
One of the first things we did was to ensure that the gas we produce could be converted into electricity. We developed a proof of concept where we took gas molecules and used them to generate electricity through a machine built by Bauerrand here in South Africa. We proved the gas works. We've drilled 6,000 square kilometers, found gas, and it can produce power. It can also substitute diesel in tractors, for example, and even power hybrid engines.

Alec Hogg:
What about support from the IDC? Could they be a partner?

Don Ncube:
The IDC did approach me, interestingly enough. Ten years ago, they didn't see the potential, but now that they've visited the site and seen the gas flaring, they're interested. They even mentioned they had R60 billion that wasn't used and had to be returned to the treasury. We're exploring partnerships with other entities as well, because we need capital and expertise to move forward.

Alec Hogg:
How close are we to making the rest of South Africa realise the significance of this gas?

Don Ncube:
It's happening gradually. South Africans are starting to realize the potential. We had a capital raising that was oversubscribed in early August. People like James Lorimer, who bought into it, heard about it at a conference in London where Kinetico was presenting. We are slowly gaining attention.

Alec Hogg:
James Lorimer also raised concerns about flaring being an environmental issue. Are you aware of Bitcoin mining operations using flaring emissions for energy?

Don Ncube:
Yes, flaring is a concern, especially in the mining industry, where gases like coalbed methane are dangerous. We go into mines to help manage these emissions and improve safety. Additionally, the gas we capture can be reused to substitute for diesel and other energy needs.

Alec Hogg:
Marius van Straaten asks, how does one get investment exposure to this gas resource?

Don Ncube:
Kinetiko, our company, is listed in Australia. James McMillian of Independent Securities is here, and he can assist with any inquiries. We've approached the Reserve Bank and SARS, and they're supportive. We are considering a dual listing on the JSE, but we need to ensure we drill enough wells to verify the size of the deposit. Once that's done, a JSE listing is possible.

Alec Hogg:
Rene Kilner asks, since 40-70% of electricity consumption is thermal, using electricity for heating or cooling is expensive. Gas is a proven cost-effective solution. Will your gas make a difference in electricity prices?

Don Ncube:
There is a serious threat to gas availability in South Africa. The Remco pipeline, operated by SASOL, faces depletion. If we don't find alternative clean sources of energy like gas, we'll be in trouble. Our gas could be a local solution, but competition from expensive imports is also a challenge.

Alec Hogg:
Don, it sounds like you're at the forefront of something truly groundbreaking. Thank you for sharing your insights.

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