[Premium] Sasol Gives Up on Future GTL Projects
South Africa’s Sasol abandonned all future greenfield Gas-to-Liquids (GTL) projects, a painful decision for the company that commercialised the technology in South Africa, Qatar and Nigeria.
The decision resulted from a strategic review of assets, which is at the halfway mark.
The main product from the GTL process is low-sulfur synthetic diesel, which was relatively easy to market when diesel was expensive before the oil price crash of 2014. Post-crash, Sasol wised up to market realities by deferring its costly 96,000 b/d GTL project at Lake Charles in the US in January 2015. Its November 23 announcement effectively shelves that $14bn project for good.
Sasol also announced that it is selling its stake in a Canadian shale gas joint-venture; the most likely market for which would have been a GTL project - hence its decision to divest.
Sasol's new long-term strategy was presented by joint CEOs Stephen Cornell and Bongani Nqwababa.
“We have made a clear strategic choice not to pursue greenfield GTL growth, further crude oil refining, mega-scale commodity chemicals,” said Nqwababa: “Renewables is not a growth focus (either).” Instead Sasol’s natural gas exploration and extraction will continue to be developed in Mozambique and in West Africa.
Sasol-operated Mozambique annual gas production since 2014 has risen by 12% to 117bn ft3 (3.3bn m3) in 2017, said Cornell: “We will continue to boost exploration growth both in Mozambique and selected countries in West Africa, with a bias to liquid plays.”
“We expect exploration and production to play a bigger role in Sasol. Hard choices include no more greenfield investment in Sasol in GTL technology. We will continue to license the technology,” he added.
The latest strategic decision is not expected to affect the piping of gas from Mozambique as a feedstock for Sasol chemical plants in South Africa.
Sasol is interested in nine West African countries, with Nigeria at the centre, extending to westwards and southwards from Nigeria, Cornell told NGW: “There were two primary things resulting in this change of strategy in GTL. The first is our (long term) view of oil prices. We have a planning base of $60/b, but are looking at what if it is $50/b.”
“There is also our view around the environmental context, and the outlook going forward,” said Cornell, explaining there are environmental pressures to move away from diesel, which will increase downward pressure on the price: “Diesel is the primary product from GTL.”
Cornell went on to explain this was a long-term outlook: “We are not looking at next year but at the next 40 years. There is too much risk involved.”
This week's decision represents a big shift for Sasol, with the company’s website in the run up to the November 23 announcement still saying: “Fast-tracking the growth of our proprietary GTL technology and facilities is one of the cornerstones of Sasol’s strategic agenda. Since we launched our first GTL facility outside South Africa in Qatar [Oryx] in 2007, we have been working to extend our GTL footprint. Our GTL represents a compelling value proposition, offering countries the opportunity to make their gas reserves work harder by producing liquid fuels and chemicals.” (The Oryx GTL photo above, is courtesy of Oryx GTL)
A plant using Sasol-licensed GTL technology is still being developed in Uzbekistan, but the South African firm no longer has equity involvement in it.
Two large-scale GTL projects are yet to come online worldwide, according to recent US Energy Information Administration estimates: the 37,600 b/d ‘Oltin Yol’ facility in Uzbekistan in 2021 and a conversion of a 160,000 b/d coal-to-liquids to a GTL plant in South Africa in 2025.