Sasol and Talisman are equal partners in the development of two natural gas fields, the Farrell Creek and Cypress A fields in British Columbia.
Talisman had been involved in the feasibility study of a GTL plant there, but the company says it will be allocating its capital to nearer-term opportunities.
Meanwhile Sasol will continue with the feasibility study and decide whether to proceed with the project in the second half of 2012, says Strauss. After all, commercialising GTL technology is one of the core drivers of Sasol's growth.
"We believe the economic drivers for GTL in Canada are strong but ultimately our decision will consider all aspects of executing such a project," says Strauss. "Of course, all decisions are also taken within the context of the broader portfolio of projects under consideration."
Sasol has a GTL plant in Qatar and projects in different stages of development in Uzbekistan, Nigeria and the US.
In October 2011, Investec Securities analyst Campbell Parry valued Sasol's global GTL plans at R90/share more than its share price, assuming all went according to plan. Parry says this valuation will be little affected if the Canadian plant doesn't go ahead because the projected returns of the Canadian plant would be a small portion of all the GTL projects.
But there are reasons to believe the Canadian project could go ahead. Sasol's strength is its ability to convert low-value gas into high-value petroleum products. Gas prices, which are not homogeneous around the world, are currently lowest in the US, below US3/MMBtu (million metric British thermal units).
A gas price of 4/MMBtu for Sasol translates into a crude oil equivalent price of $25/bbl; crude oil refiners face prices almost four times that. "Low gas prices in North America have certainly made our GTL value proposition more attractive for that region," says Strauss.
Meanwhile, the 32400 bbl/day Escravos GTL plant in Nigeria will likely start operating in the second half of 2013. And more news flow is expected in 2013 on the 38000b/d plant in Uzbekistan, now in its engineering and design phase, says Strauss. In the US, Sasol is investigating the feasibility of a 96000b/d plant in Louisiana. The study will be completed by year-end.
The 324000b/d Oryx plant in Qatar, in which Sasol holds 49%, has been converting gas into oil since 2007. Its capacity is being increased.
On one hand, it seems Sasol's GTL plans are on track, and the widening spread between gas and oil prices can only be good news. However, there is also a possibility that Sasol may walk away from one or more of these projects, says Parry. This will depend on the economics of each plant relative to Sasol's portfolio of plans.
Source: Financial Mail
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