Sasol Reviews Stake in Uzbek Multi-Bn GTL Project
South Africa's Sasol is reviewing its plans to participate in construction of a $5.6bn gas to liquids (GTL) plant for production of synthetic fuel in Uzbekistan, citing current low oil prices as its reason. It represents part of a wider reining-back of Sasol's plans in the GTL sector.
In an earnings statement, released March 7, during which Sasol also revealed a 24% decrease in its first half headline earnings per share, the company said it would review its interest in the GTL plant.
"In light of the current economic environment, in February 2016, we decided to review our long-term strategic interest in the Uzbekistan GTL investment," the company said. "The review is expected to be completed in the second half of the 2016 financial year."
The project, which was initially estimated to cost $4.1bn, has risen in cost since its conception with the latest estimations putting the figure at $5.6bn. The GTL plant is projected to convert 3.5bn m3/yr of natural gas to produce 864,000 tons of diesel fuel; 304,000 tons of aviation kerosene; 395,000 tons of naphtha; and 11,200 tons of liquefied gas.
Sasol holds a 44.5% stake in the project while Uzbek-state-owned Uzbekneftegaz also holds a 44.5% stake. Malaysian state Petronas holds the final 11% stake.
The project was planned to start in 2014 and was expected to become operational by August 2017. However Russia-based news agency Regnum quoted sources from the Uzbekistan government as saying that “prices for hydrocarbon products dropped to a critical level and will hardly go back to their previous level. It is unprofitable for the investors to continue working, especially with the amount of investments the project requires”.
South Korea's Hyundai Engineering & Construction company is currently contracted to construct the technological part of the plant.
In February 2015 Sasol announced an indefinite delay to its final investment decision (FID), which had been scheduled for 2016, on a proposed $14 billion GTL plant at Lake Charles in the southern US state of Louisiana, again due to low oil and petroleum product prices. The plant would have produced 96,000 b/d of synthetic diesel, naphtha and other products, and Sasol began feasibility studies into the project back in 2011. Sasol has operated a coal-to-liquids plant in South Africa for decades and partnered the development of commercial-scale GTL plants in Nigeria and Qatar too.
Uzbekistan plans to invest $2.798bn in its gas sector in 2016, about 8% more than the previous year. The sum comprises $2.1bn in foreign investments.
According to BP’s statistical review, the country produced 3.1mn tons of oil and 57bn m³ of gas in 2014, the latest year for which BP data is available.
Azerbaijan desk