Sasol Considers Plans to Produce Fuel from Shale Gas, Coal in China
By Bloomberg News - May 17, 2011 8:09 AM ET
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Sasol Ltd. (SOL), the world’s largest maker of motor fuels from coal, is open to adding plants to convert coal to fuels in regions of China such as Xinjiang, said John Armstrong, company president for the country.
The Johannesburg-based company will also consider projects to turn shale gas into liquid fuels should the nation allow access to such an industry in the future, Armstrong said in an interview in Tianjin today.
Sasol is trying to gain a foothold in China with a $10 billion joint venture coal liquefaction facility in the Ningxia Hui autonomous region with Shenhua Ningxia Coal Industry Group Ltd., a unit of the nation’s biggest coal producer. Sasol has halted development of the plant pending state approval, the company said in February.
“We are alert to other opportunities,” Armstrong said. “But the focus remains on Ningxia and we will not do anything to detract from this,” he said.
Sasol, South Africa’s second-biggest company by market value, uses its Fischer-Tropsch technology to transform gas from below the ocean floor and coal into liquid fuels such as gasoline and diesel in South Africa and Qatar.
Other Opportunities
“We have that one project on the go and it’s still our best entree into business in China,” Armstrong said, referring to the Ningxia project. “But maybe it won’t be the only one. Maybe there’ll be other partners or a different region. It’s hard for anyone to say no to a project in Xinjiang,” he said.
China is developing poorer provinces in the west including resource-rich Xinjiang, which contains 40 percent of the nation’s proven coal reserves, according to government data.
The country has tapped foreign companies including Royal Dutch Shell Plc (RDSA) and Chevron Corp. (CVX) to help explore and extract shale gas reserves, estimated to be 12 times higher than conventional gas reserves, according to the U.S. Energy Department last month.
“Right now, China places quite a bit of restriction on what you can do with gas and at the moment, gas to liquid isn’t too much on the radar screen,” Armstrong said. “Depending on what happens to shale gas, that might change.”
Ningxia Project
Coal-to-liquids and coal-to-gas projects were removed from the Chinese government’s list of industries whose development it plans to encourage, according to an April 26 report on the website of the National Development and Reform Commission, China’s top economic planning agency.
Sasol hasn’t set a deadline for getting government approval for the Ningxia project, Armstrong said.
“We still think we are moving in the right direction although that’s moving slower than we’d like,” he said.
Sasol submitted an application with Shenhua to the NDRC in 2009 and expected recommendations by the end of 2010, the company said last August.
It said in March 2010 it may decide on whether to go ahead with the 3.85 million metric ton-a-year Ningxia plant, about 810 miles (1,300 kilometers) southwest of Beijing, by the end of that year.
The company is cutting costs at its China operations to be “in the game for longer,” Armstrong said. Sasol has reduced its China-based staff to around 20 compared with a crew of 50 people at the peak, he said.
“Given what we’ve invested in the project so far, Sasol would be very cautious to walk away earlier than is required,” he said, declining to provide details on the company’s investments in the China business.
China Headcount
Shares of Sasol, which converts more than 40 million tons of coal annually at the world’s largest plant in Secunda, South Africa, gained 27 percent in Johannesburg in the past 12 months as rising oil prices increased the value of alternative fuels. The stock fell 0.9 percent to 357.5 rand at 12:18 p.m. local time today.
Armstrong said he isn’t planning to reduce Sasol’s China headcount further if delays to the Ningxia project continue.
“On the contrary, I’m thinking of how I’m going to remobilize, on which guys I should bring back to make sure we’ve got a strong team so that when somebody pushes the button and says go, I can go,” he said.
To contact the reporter on this story: Bloomberg News in Beijing at bchua14@bloomberg.net
To contact the editor responsible for this story: Ryan Woo at rwoo5@bloomberg.net SOL SJ <Equity> SHGCLZ CH <Equity> 1088 HK <Equity> |
