Sasol advances gas-to-liquids plan in Louisiana
South African chemical and energy company Sasol Ltd. said it could spend up to $21 billion to build a complex in Louisiana to turn natural gas into chemicals, diesel and other fuels.
Part of that could be a $5 billion to $7 billion chemical plant, similar to the type of plant a Shell subsidiary has discussed building in Western Pennsylvania. The market for these plants, known as ethane crackers, is becoming increasingly crowded because of the supply of cheap natural gas from shale.
Some experts have estimated that only half of the 10 potential projects may make it, with major competition for supplies, customers and even construction support. About half have committed to building, with the chemical arm of Royal Dutch Shell plc and a start-up from West Virginia each still considering whether to build plants in Beaver County and West Virginia.
“We can monetize these gas resources in North America,” said Sasol CEO David Constable.
The company will begin initial engineering work on a long-discussed complex in Westlake, La. A final decision on the project — and its final expected price — won't be offered until 2014. The complex, if built, will employ 7,000 construction workers during peak construction and 1,200 permanent workers, the company said.
The company expects to spend $5 billion to $7 billion on a chemical plant and later add an $11 billion to $14 billion gas-to-liquids plant that will turn natural gas into diesel. Sasol's estimated cost has risen recently by nearly $6 billion because it decided to go ahead without a partner and to expand the number of chemicals and other products the complex can make.
The chemical plant would begin operation in 2017, and the diesel plant would come on line in two stages beginning in 2018 and 2019. The diesel plant would produce a total of 4 million gallons of diesel per day.
Constable cited the low price of natural gas, the high price of oil, Sasol's strong balance sheet, and lucrative tax incentives from the state of Louisiana as reasons to begin work on the project.
“We want to grow,” he said. “We want to go to regions where we can leverage our proprietary technology.”
Sasol has long turned coal, which is abundant in South Africa, into liquid fuels. It can also use the process to spin the carbon and hydrogen in natural gas into more complex hydrocarbons that fetch higher prices because of the high price of oil.
Other chemical companies have announced plans to expand operations in the U.S. or build new ones that use natural gas as a feedstock to take advantage of U.S. natural gas prices, which have been half or below what they are in Europe and Asia.
U.S. drillers have learned to unlock enormous amounts of natural gas from shale formations under several U.S. states, which has driven down the price and given companies confidence that the price could stay relatively low for years to come.
The Associated Press and Trib Total Media staff writer Tim Puko contributed to this report.