Sep 10, 2007
Sasol says gas-to-liquids problem 'solved', but project cost to rise by $50mBack
South African energy group Sasol claims to have substantially overcome the technical problems afflicting its high-profile Oryx gas-to-liquids (GTL) joint venture, in Qatar, success at which is viewed as vital to proving a technology that could offer a serious alternative transport-fuel source.
However, CEO Pat Davies revealed that the company would have to spend an additional $50-million, or five per cent of the project’s overall value, to improve the reliability of the "fixes" introduced at the facility – the plant was initially envisaged as a 34 000-bbl/d facility, with an associated capital cost of $950-million.
The facility began producing final product in January, but on May 22, the JSE and NYSE-listed group shocked the market when it admitted to experiencing technical difficulties as a result of higher-than-expected levels of fine material being produced in the Fischer-Tropsch process. This led to an immediate sell-off, which saw Sasol’s share price fall 5,47%, or R15,09 a share, on the day.
The group revealed that it was interrogating the cause and extent of the problem and that “back-up solutions” were being sought, but that these were likely to take until the middle of 2008 to finalise.
Sasol stressed throughout that the underperformance was not insurmountable, nor would it impact on its aspiration to apply the GTL technology elsewhere. But some speculated that the technology flaws where, in fact, deeper than acknowledged, with similarities even being made between Oryx and Mossgas.
STILL GTL's 'SHOP WINDOW'Davies said on Monday that the levels of fine material (which had been choking the plant’s filters and, thus, preventing a ramp-up to full production) had been substantially reduced and that it was now targeting, for the first time, to begin operating both trains simultaneously in October.
But he refused to be drawn on when the plant would reach its nameplate output levels.
“We have now brought [the fines] down to just about the design range. So we are getting there and we have basically solved this problem. We will be installing a little bit of kit to ensure we improve the reliability on this,” Davies asserted.
He argued further that, while it was “not nice” to have to spend the additional $50-million required to improve reliability, “it is pretty insignificant in the grand scheme of things”.
“Sasol offers cutting-edge technology. But to get there, we have to take some risks. In return, our shareholders get a company that has a superior technology and returns. But, of course, that cutting edge sometimes becomes the bleeding edge and it hurts us a little bit,” Davis elaborated, noting that the group had over 100 PhDs in its employ, who “love challenges like this”.
“We are entirely confident that the technology works. We are entirely confident that Oryx is going to become the shop window for the gas-to-liquids industry that we said it would become,” Davies added.
NIGERIA PROJECT UNDER WAYThis confidence was arguably reflected in the fact that that group was proceeding with its second GTL project in Nigeria, which was expected to start up in 2010.
Davies said that the construction of the Escravos GTL project was under way, but cautioned that the Nigerian construction market was challenging and difficult to predict.
The group again emphasised the importance of both its GTL and coal-to-liquids (CTL) technologies in providing a platform for its growth in Southern African and globally.
It was continuing to pursue opportunities for the technology in China, India, Australia, the US, and in Southern Africa. In South Africa it was in the early stages of planning for a new 80 000 bbl/d CTL plant, which would be located either in the Free State, or in the Waterberg.
Davies also stressed that, while others were also pursuing GTL, it remained the technological leader in the field, and was almost on its own in the advances it had made in the area of CTL.
Royal Dutch Shell was also pursuing a GTL project in Qatar, known as Pearl, which could produce 70 000 bbl/d. But there had also been reports of challenges with that project.
“We want to use our technology to build hubs around the world . . . based on natural gas and coal, to grow our upstream business, our chemicals business and, of course, to grow our liquid fuels business,” Davies said, pointing out that South Africa had as much coal in “barrels of oil equivalent as Saudi Arabia has in oil”.
Sasol's share close up R3,10 at R288 a share.
Edited by: Creamer Media Reporter
To subscribe email firstname.lastname@example.org or click here
To advertise email email@example.com or click here
Other Energy News
Updated 6 hours ago A contract signed on Wednesday between alternative energy company Renergen, JSE-listed Afrox and The Linde Group, of Germany, is expected to open the way for a €13-million investment into the commercialisation of a Free State natural gas resource and the creation of...
Updated 2 hours 35 minutes ago Platinum mining company Impala Platinum (Implats) has secured a court order against a US platinum recycler, from which it is claiming $201-million. Implats said on Wednesday that the order, issued by the US District Court for the Eastern District of Pennsylvania,...
Updated 3 hours ago A potentially far-reaching step has been taken towards the viable roll-out of hydrogen refuelling infrastructure for platinum-using fuel cell electric vehicles (FCEVs) with the launch of a system that allows hydrogen to be stored and transported in conventional fuel...
Updated 3 hours ago At least R14-billion in investments had seen the economic development of the City of Johannesburg, resulting in economic hubs that created jobs and further opportunities for the city’s citizens, mayor Parks Tau said on Wednesday. The city had begun redesigning the...
Recent Research Reports
Energy Roundup – May 2016 (PDF Report)
The May 2016 roundup covers activities across South Africa for April 2016 and includes details of the National Energy Regulator of South Africa’s proposal to introduce a coal benchmark cost as part of its final decision on Eskom’s multiyear price determination...
Automotive 2016: A review of South Africa's automotive sector (PDF Report)
Creamer Media’s Automotive 2016 Report provides an overview of South Africa’s automotive industry over the past 12 months. The report provides insight into local demand and production, vehicle imports and exports, investment and competitiveness in the sector, as well...
Energy Roundup – April 2016 (PDF Report)
The April 2016 roundup covers activities across South Africa for March 2016 and includes details of a North Gauteng High Court Judge’s dismissal of a court application to postpone the 9.4% electricity tariff increase, which the National Energy Regulator of South...
Electricity 2016: A review of South Africa's electricity sector (PDF Report)
Creamer Media’s Electricity 2016 report provides an overview of South Africa’s electricity sector, focusing on State-owned power utility Eskom and independent power producers, electricity planning, transmission, distribution and the theft thereof, besides other issues.
Energy Roundup – March 2016 (PDF Report)
The March 2016 roundup covers activities across South Africa for February 2016 and includes details of the Department of Energy’s plans to announce the preferred bidders for the first tranche of the coal independent power producer procurement programme; the Council...
Steel 2016: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2016 Report examines South Africa’s steel industry over the past 12 months. The report provides insight into the global steel market and and particularly into South South Africa’s steel sector, including production and consumption, main...
This Week's Magazine
The two spent-fuel pools at Eskom’s 1 800 MW Koeberg nuclear power station, in the Western Cape, will be full by 2018, increasing the urgency on the State-owned utility to begin pursuing alternative storage options. Koeberg has, over the past 32 years, accumulated a...
South Africa lacks the skills necessary to implement the government’s plan to build 9.6 GWe of new nuclear energy capacity, warns nuclear-qualified Quality Strategies International CEO David Crawford. “Apart from the concern about the affordability of the programme,...
Cybersecurity multinational Check Point has released its latest 700-series cybersecurity systems for small businesses, which draw on its international threat intelligence to provide up-to-date cybersecurity, says Check Point South Africa country manager Doros...
Daimler Trucks and Buses Southern Africa (DTBSA) saw a marked slip in new-vehicle sales in 2015 compared with 2014, with sales dropping from 5 897 units to 5 300 units. The decline came as the South African new truck and bus market declined from 31 558 units in 2014...
Group of 20 (G-20) economies threatened to penalise havens that don’t share information on their banking clients after the leak of the Panama Papers provoked a global uproar over tax evasion. The G-20 will consider “defensive measures” against financial centers and...