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Monday, November 27, 2017VOLUME 13 ISSUE 48
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Sasol to Abandon Its U.S. GTL Project

South Africa-based energy and chemicals company, Sasol Ltd. announced last week that will not invest in further Greenfields gas-to-liquids (GTL) projects. This decision means the company will no longer pursue its proposed $13 billion to $15 billion GTL project in Louisiana, near Lake Charles. In January 2015, Sasol announced it was delaying a final investment decision on the project to conserve cash in response to lower oil and gas prices.

In December 2012, Sasol announced it planned to build a plant in Louisiana to convert natural gas to diesel, chemicals and other liquid fuels at an estimated cost of around $21 billion. The project was to comprise a gas processing plant, a chemical plant and a refinery. The plant would have converted natural gas into diesel and other refined products and accounted for the bulk of a chemical complex.

The planned facility would have been the second largest in the world after Royal Dutch Shell's GTL plant in Qatar.

Sasol's gas-to-liquids plant is the second such project to be abandoned in the state within the past four years. Royal Dutch Shell canceled a proposed Ascension Parish plant in 2013 after its projected cost of $12.5 billion quickly ballooned to more than $20 billion.

Joint President and Chief Executive Officer (CEO), Stephen Cornell says: "In developing our strategy, we considered both the opportunities and risks we face, informed by developments in the external environment. It is clear that megatrends influential to our business will result in greater demand for chemicals and energy products in key markets we serve."

"While our current GTL assets are generating good returns and cash flows, the value proposition for Sasol to build new GTL projects is uneconomic against a volatile external environment and structural shift to a low oil price environment."

Cornell adds "Sasol will maintain its industry-leading position in Fischer-Tropsch (FT) technology".

"We will continue to work on opportunities to optimise and improve our existing facilities in regard to catalyst performance, product yields and energy efficiency. We also see further opportunities to high-grade the value from our GTL molecules through base oils extraction, and we will continue to license and support our FT technology," says Cornell.

"From now until 2022, Sasol will focus on delivery of the Lake Charles Chemicals Project (LCCP) in the US and the Production Sharing Agreement in Mozambique, while extracting further value from our existing portfolio of diversified assets. In this period we are targeting an improvement in return on invested capital (ROIC) of at least 2% on our financial year 2017 base. This will be achieved through continuous improvement that will encompass various initiatives across our value chain," says Paul Victor, Chief Financial Officer  .

"Beyond 2022, we will focus on building an investment portfolio of smaller to medium-sized organic and inorganic opportunities, in the range of US$500 million to US$1 billion. This will be directed towards our growth focus areas in specialty chemicals, exploration and production and retail fuels," says Victor.

Sasol will also divest from its Canadian shale gas assets which hit its 2016 earnings with a 9.9 billion rand ($715 million) impairment.

The company plans to continue with its Louisiana ethane cracker project, which is now estimated to cost $11.13 billion to complete and will be the biggest foreign investment by a South African group. It is now 79 percent complete. The plant will take ethane, a component of natural gas, and turn it into ethylene, used in the manufacture of plastic products.

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