South African energy group Sasol, which has the technology to convert coal to transport fuels and chemicals, has decided to pull back from a coal-to-liquids (CTL) project it had been pursuing in China together with the Shenhua Ningxia Coal Industry Group.
New CEO David Constable said on Monday that, owing to delays in receiving a response from the Chinese authorities on a project application report submitted in December 2009, the group had decided to prioritise other investment strategies in South Africa and abroad.
The group had invested some $120-million in the project, but had now also decided to reallocate planned project funding previously destined for the Chinese project.
It had also decided to redeploy staff to other projects across the group. The JSE-listed company would invest about R63-billion on sustaining and growing projects during its 2012 and 2013 financial years.
Senior executive responsible for international operations Lean Strauss said that the group was still keen to pursue other chemicals opportunities in the fast growing Asian economy. But given the delays, as well as a review of the level of coal resources that could be allocated towards chemicals production in future, it was considered “prudent” to pursue other group prospects.
Constable added that future CTL prospects would not be precluded from its activities in the country and that there was a strategic desire to grow Sasol’s presence in the country.
“If [another CTL prospect] came up, we would look at it,” Constable said, adding that there was potential for such prospects to emerged in the western regions of China.
But he also indicated that the key investment thrust remained upstream gas and exploiting the group's ability to convert conventional and unconventional gas prospects into fuel and chemicals.
But it would also pursue “focused” CTL prospects. That said, a further CTL prospect in South Africa, dubbed Mafutha, remained in a holding pattern while Sasol sought carbon capture and storage solutions and awaited clarity from government as to whether it supported the development.