South African fuel producer Sasol Ltd. has begun its move into the Canadian sector, signing on an industrial property in Edmonton, Alberta. The producer proposes a multi-billion dollar gas-to-liquid fuel conversion plant, a first-time innovation in the Canadian sector.
Sasol is the world’s largest producer of fuels for the automotive industry, producing the majority of its diesel and other fuels from coal. Uniquely, the company spends over two-thirds of its capital within its home country of South Africa; however, it has recently announced an expansion into North America and Canada, with this property signing the first step in a more visible Canadian push.
The company first entered the Canadian scene in 2011, buying a 50 per cent interest worth $2 billion in Canadian firm Talisman Energy Inc.’s gas-rich shale assets in British Columbia. The duo had intended to launch the gas-to-liquids operation as a joint-enterprise, however on further research Talisman has opted out of the challenging new initiative, although the partners continue to work together on the original shale project.
Sasol now proposes the gas-to-liquid fuels conversion plant as its first solo, high-profile endeavour in the Canadian sector, where it is currently viewed as a largely unknown entity. Another such conversion plant does not exist in Canada, meaning that Sasol would immediately be a sector leader should the planned project come to fruition. Analysts have speculated that the costs of creation of such a plant would come to in the region of 10 billion Canadian dollars ($1.2 billion), however president of new development for Sasol Canada Rudi Heydenrich disclosed that the company has not yet completed plans advanced enough to be able to make an adequate forecast of costs.
Heydenrich went on to explain that an initial feasibility study has been completed, which estimates the plant would have a capacity of approximately 48,000 barrels per day (bpd) in the early stages of operation, although this figure could potentially rise to 96,000 bpd. Operation could commence by 2020, dependent on the results of detailed engineering plans currently in progress.
If the plant does begin production, it is hailed as potentially providing the answer to many of the difficulties that are faced by Canadian gas producers in the current climate. With North American prices sliding due to a surge in foreign shale products being imported to the continent, Canadian producers have been feeling a real squeeze in the market, with financial dangers threatening the sector.