Sasol eyes Chinese coal-to-liquid plans
September 13, 2005
By Ingrid Salgado
Johannesburg - Sasol, the pioneer of producing liquid fuels from coal, could take equity stakes of up to 50 percent in two proposed Chinese coal-to-liquid (CTL) projects, chief executive Pat Davies said yesterday.
The petrochemicals group, which yesterday announced record profit of R9.6 billion for the year to June, would decide whether to invest in the Chinese ventures based on the outcome of feasibility studies expected within two months.
Depending on the findings, Sasol's equity investment could vary from zero to 50 percent, Davies said. The company's preferred position was "not at the zero end of the scale", but the group would retain a "high level of flexibility" when examining options.
The Chinese proposal is for two facilities producing 80 000 barrels a day at Ningxia autonomous region and Shaanxi province, both in the coal-rich western part of China. Davies said both states were on a drive to stimulate industrial growth and he was confident attractive incentives would be offered to Sasol.
When asked the value of Sasol's investment, he said: "We haven't built a CTL plant since the late 1970s, so we're having to obviously refine that technology. The cost numbers haven't come in, and that's why we must wait for the study."
Sasol also announced that renewed interest in its CTL technology had come from coal companies in the US, India and Pakistan, whose considerable coal reserves could help to reduce dependence on imported crude oil, which surged above $70 (R440) a barrel last week.
Although Sasol has been conducting a number of studies on applying its technology to those countries, Davies cautioned that it was "early days" and that China remained the company's main focus.
"I'm merely pointing out the global opportunity that awaits Sasol," he said.
An analyst at a major investment bank said that investment in CTL became viable at oil prices above $35 a barrel. "There is nothing like high oil prices to get people excited about alternatives."
The level of investment required in CTL projects is expected to exceed Sasol's per barrel spending on gas-to-liquid (GTL) ventures because the coal gasification portion of the technology is more capital intensive.
Sasol is currently building GTL facilities in Qatar and Nigeria, and plans to produce 540 000 barrels a day of GTL capacity by 2014.
The Qatari plant is expected to be ready for start-up in the first quarter of 2006, while the Nigerian plant could be operational in the first half of 2009.
In the year to June, Sasol's offshore investments in GTL amounted to R1.5 billion. Three-quarters of its R13.2 billion capital-spending bill went into the South African economy, primarily for Project Turbo, in preparation for the banning of lead from the fuel pool next year.
Sasol's share price closed R5.50 higher at R228 in Johannesburg yesterday.
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