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Sep 13, 2007

Sasol in talks to build two coal-to-liquids plants in China

Sasol CE Pat Davies discusses the firm's international ambitions (13/09/2007)
© Reuse this The world’s biggest producer of liquid fuels from coal, Sasol, is conducting feasibility studies into the possible construction of two such plants in China, where it was currently in “hard-nosed” commercial negotiations, its head said on Thursday.

Each plant would produce 80 000 bl/d, at an estimated capital cost of $7-billion to $8-billion.

“We’re busy with some fairly hard-nosed commercial negotiations,” Sasol CE Pat Davies told the Pittsburgh Coal conference in Sandton. “If you look at a cost benefit analysis for China, there is no doubt that this should be done in those countries.”

However, he said that it was always a challenge to negotiate the details of the commercial agreements.

China has some of the biggest coal reserves in the world.

Sasol produces nearly a quarter of South Africa’s liquid fuels from coal.

Production at its Secunda plant was 150 000 bl/d, and the firm had plans to grow this by 20% in just less than a decade, Davies said.

It also had plans to build an 80 000 bl/d plant in the Waterberg coalfields or the Free State.

“We had the premier of China in South Africa for 22 hours last year and he visited us for one of those hours to demonstrate the keenness that China has to use the same technology,” Davies stated.

However, in an interview after his presentation, he said that Sasol was not likely to begin construction on either of the two plants “any time soon”.

“It will probably be about a year before there is any real news flow from there,” he said.

US prospects depend on legislative changes

Sasol was eyeing the potential of building CTL plants in the US, which boasts the world’s biggest coal reserves, but was waiting for new legislation to be passed.

The new laws could offer subsidies for firms that produce liquid fuels from coal, and there is currently a big political push for government to agree to this.

Meanwhile, Sasol is also operating in joint-venture with Chevron in Australia, where it is studying the viability of building a gas-to-liquids plant.

Davies said that this study would take another year to a year and a half to complete.

Logical shift

Davies said that, as oil reserves declined, it made sense for the world to look to coal as a viable supplier of fuel for the transport industry.

He noted that oil was found mainly in only nine countries, representing some 5% of the world’s population, while 80 countries had coal reserves, and these states represented nearly half of global population.

An example that Davies gave of the impact that exploiting these reserves for liquid fuel purposes was China’s situation.

He showed how China could reduce its oil imports by 15% if it converted just 1,5% of its coal reserves to liquid fuels, through 12 plants.

“We see a huge opportunity for coal in the transportation industry, Davies enthused.

Shares in Sasol, which earlier this week announced plans to sell 10% in the company to black investors, gained 1,36% on Thursday, to close in Johannesburg at R298,01 a share. 

Edited by: Liezel Hill
© Reuse this Comment Guidelines (150 word limit)
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