Sasol, the South African energy company based in Johannesburg, is taking a big leap of faith that the shale gas industry in the US will go from strength to strength and last for many more years to come.
The company is a pioneer in gas-to-liquid (GTL) technology, and plans to build the US’s first ever plant for converting natural gas to liquid fuels, such as diesel and jet fuel.
Sasol have chosen a location in the southwestern corner of Louisiana, where the plant will have good access to large shale fields just to the north, and also to the west in Texas.
David Constable, CEO of Sasol, said that, “by incorporating GTL technology in the U.S.A.’s energy mix, states such as Louisiana will be able to advance the country’s energy independence through a diversification of supply.”
Sasol already has smaller plants in South Africa and Qatar, but the 96,000 barrel a day, Louisiana plant will be the second largest in the entire world, after Royal Dutch Shell’s Pearl Plant in Qatar.
Related Article: Former Enemies Japan and Russia to Trade LNG?
Construction is planned to begin in 2018, cost between $11 and $14 billion, create around 7,000 jobs during construction, and 1,200 permanent jobs.
One of the key problems facing the plant’s construction is the possibility of costs running way over budget, and profits not being as high as predicted if natural gas prices decide to rise.
Shell’s Pearl plant in Qatar was three times over budget, which has led many other energy companies to avoid building such GTL installations. Profits are also completely dependent on natural gas prices staying low and diesel, and other fuel prices remaining high.
Don Hertzmark, an international energy consultant, said that “if you didn’t have cost overruns, and if you didn’t have maintenance unscheduled downtime — if everything worked perfectly — then G.T.L. plants look pretty good on paper. These plants are only economic with very low gas prices.”
By. James Burgess of Oilprice.com