Sasol Puts Chinese Coal-to-Liquids Project on Hold

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Researched by Industrial Info resources (Sugar Land, Texas)--In January, South Africa's energy and chemicals major Sasol Limited (NYSE:SSL) (Johannesburg) announced that it would not go ahead with an Indonesian coal-to-liquids (CTL) project that was in the concept-planning stage. Although uncertainty about the Indonesian coal feed and finance for the project were mooted in the market, Sasol said clearly that the future lay in gas and gas-to-liquids (GTL) projects. For related information, see January 20, 2011, article - Sasol Drops Indonesian CTL Project, Shifts to Gas-Feed Strategy.

At the same time the company said it would complete the CTL project in China's northwestern autonomous region of Ninxia Hui. While on a visit to China with a business delegation led by South Africa's President Jacob Zuma, Sasol CEO Pat Davies said that Sasol and 50:50 partner Shenua Ningxia Industry Group (Ningxia, China) had created the best commercially proven integrated technology package to advance the project on which feasibility studies had been completed.

In the first week of February, Sasol said that work on the Chinese project was being put on hold while the partners waited for the country's National Development and Reform Commission's (NDRC) decision on approval for the $10 billion project after viewing the project application. The CTL plant at the Ningdong energy and chemicals complex, which has a planned production capacity of 94,000 barrels per day, would use Sasol technology and would be funded by 50% investment from both partners. It would also be the largest single-project foreign direct investment in China to date.

The NDRC recommendation on the project to China's energy department was expected well before the end of 2010. A clue to the delay can be seen in the 2008 decision when Sasol dumped another Chinese CTL project in the Shaanxi province as the Chinese government was becoming negative toward projects that would be high consumers of energy and raw materials such as coal. The CTL projects at one time were considered strategic pathfinders in the country's energy mix, but now gas-based or gas-producing projects may be at the forefront of planning decisions. This could be especially true of government thinking on the Ningdong project, especially after Sasol's own optimistic comments on the future of gas-based projects.

Many companies globally are currently adopting national priority measures toward their domestic resources and are at the same time securing foreign sources to keep their expanding power and steel industries fed in a market where prices for quality products are constantly rising.

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