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Gold/Mining/Energy : Gasification Technologies -- Ignore unavailable to you. Want to Upgrade?

To: Dennis Roth who wrote (400)	6/7/2006 6:20:42 PM
From: A.J. Mullen	Read Replies (1) \| Respond to of 1740

That's very impressive. It suggests a return of around $26 per barrel - simply by dividing $950 million by (34 000. barrels a day X the days in 3 years). I wonder if there is a value assigned to the natural gas input, and if the $15 a barrel figure for viability incorporates that value. $15 + $26 is less than the current cost of unrefined oil, so I imagine the cost of gas is set on an agreed sliding scale determined by market values. Ashley

To: Dennis Roth who wrote (400)	6/9/2006 8:11:15 AM
From: Dennis Roth	Respond to of 1740

Energy world eyes Sasol in Qatar Carli Lourens Posted to the web on: 09 June 2006 businessday.co.za SASOL could well be on the verge of becoming a global energy heavyweight after taking the rather courageous step of building the world’s first commercial-scale plant turning natural gas into diesel and other fuels — and doing so at what seems to be precisely the right time. If its Oryx gas-to-liquids project it opened in Qatar this week is successful, it will mark the birth of a new industry that will give the world better, cleaner fuels amid the tightening grip of oil prices. Judging by growing investor interest and the likelihood that the energy giants of the world are keeping a close eye on Sasol in Qatar, it seems the world is starting to take note of the former state-owned South African company. The number of people attending its foreign road shows has quadrupled in the past year or two, and more global fund managers are among those, says Sasol. The group’s share price, which has doubled over the past 18 months, has started tracking those of other alternative energy companies more closely — another indication of increasing interest and understanding of what Sasol is about. There is no question the Qatar gas-to-liquids project will be highly profitable, provided everything runs smoothly operationally. It will be profitable even if oil prices were halved from their current levels. Oryx will have a fast payback period: Sasol says two-and-a-half to three years. Independent energy consultancy Wood Mackenzie said recently that gas-to-liquids projects would pay for themselves in less than two years. These projects can make extraordinary returns on capital employed, the consultancy said, when oil was trading at about $63 a barrel. These returns are far higher than that available from typical refining investments, it said. Sasol won’t say what the margins at Oryx will be, but says the internal rate of return will be “of the order of 30%”. There are benefits and disadvantages for Sasol in being ahead of what is likely to become a gas-to-liquids race. Several energy companies announced gas-to-liquids project plans some time ago, such as Shell and ExxonMobil, but construction on these has not started. Gas-to-liquids technology is perceived as high-risk, given that it has not been tested on a large scale. An explosion at one of only a few small gas-to-liquids plants worldwide — Shell’s Bintulu plant in Malaysia in 1997 — did not help negative perceptions, despite an investigation showing the accident was not related to the technology. A large part of the 13-year-old Bintulu plant was damaged in the explosion, which was apparently caused by accumulated airborne contaminants released from forest fires. Reconstruction took 28 months and production resumed in 2000, according to the magazine Petroleum Economist. Government and the private sector would be a lot calmer about gas-to-liquids technology if the world’s largest energy companies all put up gas-to-liquids plants. This would mean that Sasol would have an easier job selling projects and their production to government and clients, though it doesn’t seem to have too much of a tough time doing this at the moment. Several governments, including Australia’s, appear to be cautiously interested in having gas-to-liquids projects. And Sasol says companies bidding to buy fuels such as diesel and naphtha from the Oryx plant are offering higher prices than Sasol had anticipated. One of the biggest advantages of being first with a large modern gas-to-liquids plant is that Sasol doesn’t have to compete against the global energy giants in securing its slice of the gas-to-liquids market from the outset. Sasol will also have the benefit of learning some cost-saving lessons about operating large gas-to-liquids plants ahead of its potential rivals. Sasol expects investment in gas-to-liquids projects to take off as soon as the world starts understanding the associated risk-reward relationship. The perception, according to Sasol, is that the risk is higher than it should be. Davies says the Oryx project could be labelled a success from a technology-risk perspective after about six months of smooth operation. Its partner in the Oryx project, state-owned Qatar Petroleum, needs to see a reasonable period of smooth operation before it gives the go-ahead for an expansion of the plant from 34000 barrels a day to 100000. The risk associated with large gas-to-liquids projects appears to be higher than other fuel plants. Wood Mackenzie says technology risk is “a key additional element for gas-to-liquids projects. Sasol describes it as “reasonable” risk. Only time will tell. It would have been easy for Sasol to sit back and continue pleasing shareholders with super profits on the back of existing operations that benefit from high oil prices, without going out on a limb and building new-technology plants in areas such as the Middle East. But it has, and it should be commended for this. Government seems to acknowledge this. Minerals and Energy Minister Buyelwa Sonjica accepted Sasol’s invitation to the launch of the plant this week in Qatar, despite having been appointed only two weeks ago. It was her first official visit abroad in her new position. And she had some good things to say about Sasol. She alluded to Sasol setting an example in developing cutting-edge technology and exporting it. It’s too early to say relations have been mended, but Sasol, which has appointed three black executive directors in less than a year under the leadership of Pat Davies, seems to be making headway in this regard. The Oryx opening event was also attended by the emir of Qatar, underscoring the importance that country attaches to the Oryx project. Qatar seems to be a good venue for gas-to-liquids projects. Its government is eager to see these projects flourish and is putting its money behind this goal, having taken a 51% stake in Oryx. It wants to become the gas-to-liquids capital of the world. Qatar has huge gas reserves and is an economically and politically stable environment. Qatar, and more specifically Doha, is known in SA as the starting point for the Doha development round of trade talks about five years ago. It will now also be known as the place where Sasol broke new ground. The latter, it seems, is likely to be a whole lot more successful than the former. Lourens is trade and industry editor.