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Calgary - Sasol [JSE:SOL] is a step closer to building
Canada's first multibillion-dollar plant to convert cheap natural gas to diesel
and other fuels after the South African company signed an option on an
industrial property near Edmonton, Alberta.
Sasol, a new entrant into the Canadian energy sector, has
secured a site in Fort Saskatchewan, Alberta, drawn by the region's extensive
infrastructure for both natural gas and refined products, Rudi Heydenrich,
president of new business development for Sasol Canada, said on Thursday.
Total SA had previously planned to build an oil sands
upgrader on the property, which is in a region known as the Industrial
Heartland.
The gas-to-liquids operation, which would ultimately have a
capacity of 96,000 barrels a day, would be a welcome and sizable new customer
for Canadian gas producers whose finances are under pressure from weak North
American prices due to booming shale supplies that have flooded the continent.
Such a plant would use about 1 billion cubic feet a day of
gas, about 8% of Alberta's current gas output.
Analysts have pegged the cost of a plant as high as C$10bn
($10.3bn), though Heydenrich said Sasol has not yet advanced the plan to the
point where it could estimate costs.
It has just completed the feasibility study and is now
beginning front-end engineering design for the plant, which would likely have
an initial capacity of 48,000 bpd. Following that, the company would make a
go-ahead decision and the facility could be in service around the end of the
decade.
Profitability for a GTL operation is based on a wide spread
between crude oil and natural gas prices, rather than a ceiling price for gas,
Heydenrich said.
"One of the big advantages in North America is what we
perceive to be structural disconnect between gas and oil (prices), and we sell
our products, which are oil-related," he said.
Sasol entered Canada in 2011 by buying a 50% working
interest in Talisman Energy's gas-rich Montney shale holdings in
northeastern British Columbia for $2bn.
The companies had studied the GTL idea together before
Talisman opted out of the planning in June. They remain partners in Montney
exploration and production.
Talisman has said it may now develop its gas assets with a view to ship supplies to Canada's West Coast, where several companies are planning liquefied natural gas plants aimed at exports to Asia.
