Sasol Inscrutable in China as Sasol Chevron Pushes $6 Billion GTL Projects in Qatar

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Researched by Industrialinfo.com (Industrial Information Resources Incorporated; Houston, Texas). As expected, ChevronTexaco (NYSE:CVX) (San Ramon, California) has been brought into the GTL production scene in Qatar through its partnership with Sasol (JSE:SOL, NYSE:SSL) (Johannesburg, South Africa) in the global application of the GTL technology. The 50/50 joint venturers are planning to invest $6 billion in the country's gas industry.

A MoM (Memorandum of Understanding) has been signed by Sasol Chevron to study a $1.5 billion expansion of the existing Oryx GTL project. The original Oryx project was launched before the two partners tied up and was a joint venture between Sasol and Qatar Petroleum (QP). (See related March, 18, 2004 Industrialinfo.com interview with Pieter Cox, CEO of Sasol - Technology Driven Sasol Steps Up Fuel Diversification Effort with Global Coal, Natural Gas, Gas-To-Liquids, and Downstream Projects)

The technical and business principles to support the expansion plan have been discussed to support the increase of the foundation plant to an output of 100,000 barrels per day (bbl/day). This will involve defining the feasibility of a three train, 65,000-bbl/day facility with an expected start up by 2009. QP and Sasol Chevron have also signed a Letter of Intent (LOI) to examine GTL Base Oils opportunities in Qatar.

Another $4.5 billion investment is planned for an integrated 130,000-bbl/day upstream/downstream integrated GTL project based on the Sasol Slurry Phase Distillate Process. This project would be an integrated scheme involving the development of gas from Qatar's vast North Field, which is the largest single gas deposit yet discovered.

The North Field project would comprise the drilling of wells, extracting and cleaning the gas, and then converting the gas into liquid fuel in a new plant. This project and the Oryx development will build on the technical and operational expertise already established through Oryx and Escravos GTL facility in Nigeria. The North Field integrated project will also utilize the comprehensive upstream capabilities of Chevron Texaco.

At the announcement of the projects in Doha, Qatar's deputy prime minister and minister of energy and industry, Abdullah Bin Hamad Al-Attiyah, said that he welcomed the participation of Sasol Chevron. "We are working hard to realize the ambition of the state of Qatar to become the GTL capital of the world, and these projects will make an important contribution to achieving that aim," he said. Qatar is currently in negotiation with at least two other majors on GTL projects. (PEC: 98890047)

Sasol's share of the total investment of $6 billion is said to be about $2.6 billion but Sasol executive director, Pat Davies, cautioned that although Sasol would expand further in Qatar, more decisions would have to taken before all three projects could in fact proceed.

In China, talks are said to be continuing between Sasol and Shenhua (PEC: 88000535)/201/196) (and other companies) on the possibilities of constructing a $3.6 billion coal-to-petroleum plant. Zhang Yuzhuo, Vice President of the state controlled energy company, said that as China's top coal producer it is planning to double its output capacity to 200 million tons by 2010 and pursue a $1.5 billion overseas foreign listing. He said that coal would remain the biggest component of the country's energy mix through 2010 and Shehua's capacity could reach 300 million tons by 2020.

He said that the company would like to get into the coal liquefaction business despite the high costs involved and gave an estimate that Shenhua would produce ten million tons of oils and chemicals from coal a year by 2010.

Sasol CEO, Pieter Cox was reported to have said that Sasol might join in the operation in the first phase of the coal to oil plant which has a projected capacity of three million tons of motor fuel a year. He said that the Chinese government wished to encourage development in the center of the co the world's sixth largest coal company must have some attractions for Sasol.

Cox's 'might' could be a response to remarks by Wen Xinsheng, deputy general manager of Shenhua's coal-to-oil arm, who said that although Shenhua aimed to start construction of the project next year, after talks with foreign partners had ended, this date was not 'set in stone'. Talks with foreign companies were motivated by the fact that the company was "concerned Sasol will ask too much for the project."

As an old Chinese general might have said "Deputy general managers are used to fly kites to ascertain the cost of partners." Pieter Cox has said that Sasol had been in talks with the Chinese' for years 'and that nothing was imminent.