Kenertec Co. signs $5.5 billion CTL deal in Indonesia
South Korean group Kenertec Co. has signed a $5.5 billion deal for a coal liquefaction project in Indonesia which could supply 5% of Korea’s fuel demand by the next decade.
Author: Angela Moon
Posted: Tuesday , 24 Jul 2007
mineweb.net
SEOUL (Reuters) -
South Korea's Kenertec Co. will finalise on Wednesday a $5.5 billion deal for a coal liquefaction project in Indonesia, which could make enough fuel for 5 percent of the North Asian country's demand by next decade.
The project with PT Nuansa Cipta Coal Investment and POSCO Engineering and Construction, a unit of POSCO Co. Ltd., will begin six months after the deal is signed and is one of the largest planned coal-to-liquids (CTL) plants.
The first stage will cost $2 billion and produce about 30,000 barrels per day (bpd) for five years, as well as guaranteeing coal supplies and providing coal export infrastructure such as railways and terminals.
"This deal will secure a steady supply of coal to South Korea, but the products will be sold all over the world," Suh Dong-hoon, Kenertec's director of overseas coal business, said on Tuesday.
A second stage costing $3.5 billion will add another 70,000 bpd, increasing total capacity to 100,000 bpd -- more than double Korea National Oil Corp.'s (KNOC) production of 40,000 bpd -- and against total oil product demand of 2 million bpd in South Korea.
Major coal producers such as China and the United States have shown growing interest in CTL plants amid high oil prices and worries over energy security (for factbox see
The complex, to be built in East Kalimantan, on Borneo island, was first announced by Kenertec in June, but the value had not been disclosed. It was part of a raft of energy and mining deals to be signed between the two countries this week.
PARTNERS
Suh said last month the company expected to use up to 1 million tonnes of coal starting next year for the initial period under the joint venture. It will extract oil using a direct liquefaction technology provided by an unnamed U.S. firm.
Kenertec, which has a total market capitalisation of $346 million and whose main business is building industrial machinery, said it was seeking financial institutions to fund the project and more partners to join the consortium but declined to identify possible candidates.
"I don't think they have enough financial capacity to tackle a CTL project," said Yong-hun Jung, analyst at the Asia Pacific Energy Research Centre in Tokyo.
"In the Korean stock market, many small companies are trying to use resource development projects as a way to boost their stock price."
Shares in Kenertec ended down 2.71 percent, a steeper decline than the 0.65 percent losses in the tech-heavy KOSDAQ index
Industry sources have picked Samsung Securities as a strong candidate for a partner, though Kenertec, Samsung and POSCO declined to confirm.
None of these are established CTL technology developers, unlike South Africa's Sasol, energy major Royal Dutch Shell and China's Shenhua Group Corp.
Shenhua plans a similar size plant in Inner Mongolia, but concerns over high capital costs and water shortages in China may delay projects in China, while CTL's high emissions of carbon dioxide rule it out for countries with Kyoto Protocol targets.
"CTL is really a long shot, both technically and economically. Moreover, the net energy gain is still in huge doubt," said Jung. (Additional reporting by Neil Chatterjee in Singapore) |
