Award of Orissa Coal Block Advances Tata-Sasol CTL Project

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Researched by Industrial Info Resources (Sugar Land, Texas)--Although planning for the proposed Indian coal-to-liquid (CTL) project by Sasol (NYSE:SSL) (Johannesburg) and Tata Sons (Mumbai) is still a work in progress, the awarding of coal rights in Orissa has given serious intent on the project to the alliance, called Strategic Energy Technology Systems (SETS). The North of Arkhapal-Srirampur coal block awarded to SETS is in the coal-rich state of Orissa, which is estimated to hold 20% of the country's coal reserves.

After securing the coal block, SETS will now launch a prefeasibility study of the 80,000-barrel-per-day (BBL/d) project, which would need an investment of up to $7 billion. It would be similar in cost and specifications to Sasol's proposed CTL plant to be undertaken with Shenhua in the Ningxia Hui Autonomous Region in China. The 50:50 Orissa venture would produce diesel and naphtha as its main products and some liquid petroleum gas. The schedule for the project will require a final decision to build to be made in 2012 and four years to construct the plant, giving a commissioning date of 2016-17. Tata's role in the venture will be to assist in the gaining of government concessions as the partners keep an eye on the price of oil through 2012.

Sasol's strong balance sheet has allowed the company to keep its project growth on course while at the same time reduce the financial gearing from between 50% and 30% to between 40% and 20%. This gives positive impetus to the South African Mafutha CTL project near Lephalale in the northern Limpopo province. The prefeasibility study on this 80,000-BBL/d project is nearly complete, and a memorandum of understanding has been made on the project between the country's Industrial Development Corporation and Sasol with the support of the government's energy cluster group.

In another boost to its domestic and regional energy resources, Sasol has reached an agreement with Mozambique to increase its natural gas production in that country by 53%. The local journal Noticias reported that 27 million gigajoules of the additional 63 million gigajoules produced will be exported to South Africa, 27 million will go to fuelling a new power station in Mozambique and 9 million will be used in other local projects. Planning is progressing for the $1.3 billion gas-fired 680 MW power plant to be constructed in Moamba, a town 60 kilometers northwest of the capital Maputo plant. A likely customer for power exports from the plant would be Eskom, South Africa's power-hungry utility.

Mozambique's gas currently flows to Sasol in South Africa from the Inhambane gas fields in the southwest of the country through a $1.2 billion, 865 kilometer pipeline built in 2004. For related information, see March 12, 2009, news article - Jindal Steel and Tata-Sasol Joint Venture to Develop India's First Two Coal-to-Liquid Plants.

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