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Cablegate: South African Sasol Targets Coal-to-Liquid Fuel Plant In

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RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
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ZNR UUUUU ZZH
R 051241Z SEP 07
FM AMEMBASSY PRETORIA
TO RUEHC/SECSTATE WASHDC 1542
INFO RUCPDC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE

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E.O. 12958: N/A
TAGS: EPET ENRG EMIN EINV EIND ETRD SF
SUBJECT: South African Sasol Targets Coal-to-Liquid Fuel Plant in
the United States


1. (U) SUMMARY: South African Sasol is seriously considering
investing in a coal-to-liquid (CTL) facility in the U.S., targeting
Texas, Montana, Wyoming, Illinois, or North Dakota. This potential
project would represent Africa's largest investment in the U.S. if
realized. The issue of carbon emissions is an obstacle to
investment. End Summary.

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Sasol's Quest
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2. (U) Mineral and Energy Officer and Specialist met August 29 with
a business group representing Sasol North America and its advisor,
the Livingston Group. Livingston is lobbying for investment and
construction of a Sasol-type coal-to-liquid (CTL) fuel facility in
the United States. The purpose of the meeting was to inform the
Embassy of the status of CTL developments in the United States and
to solicit potential future Embassy support and advocacy for these
projects with both the SAG and the USG. If successful, the project
could provide an alternative secure supply of petroleum fuels for
the United States, independent of supply from "difficult" foreign
sources.

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Sasol's Leading Role
--------------------

3. (U) Sasol is the global leader in the production of liquid fuels
and chemicals from coal. Coal currently supplies some 23 percent of
South Africa's liquid fuel needs. This figure could rise to about
36 percent if currently proposed expansions take place: incremental
20,000 barrels per day at Secunda and a new 80,000 barrels per day
plant at a yet-to-be identified location. Sasol has agreed to build
an additional facility in SA, reportedly in exchange for the SAG
dropping a threatened "windfall" tax on recent high profits.
Sasol's Fischer Tropsch technology, originally obtained from
Germany, has been refined and improved over the past 60 years and is
the leading technology in the gasification and reconstitution of
coal into a variety of liquid fuels and chemicals. According to
Sasol and Livingston reps, given the combination of declining global
oil reserves, current refinery capacity constraints, the U.S'
dependence on supply from "difficult" sources, and the U.S.'
significant resources of indigenous coal, CTL technology could
provide a comfortable level of energy security in the medium to
longer term. Sasol has an existing petrochemicals facility in Lake
Charles, Louisiana.

4. (U) Comment: Sasol's global marketing strategy is to look for
countries that have a large demand for energy, a shortage of
petroleum, and an abundance of coal reserves. The most attractive
countries according to these criteria are China, India and the U.S.
End Comment.

5. (U) The Sasol and Livingston team stated that five states would
be possible targets for the investment in converting coal resources
into liquid fuel products: Texas, Montana, Wyoming, Illinois, or
North Dakota. The Illinois deposits are attractive because of their
proximity to markets, whereas the Montana and Wyoming deposits are
attractive because of their high grades of coal. The potential CTL
plant would require access to one billion tons of coal reserves, be
designed to produce 80,000 barrels per day of crude equivalent, and
would cost an estimated $8 to $10 billion. If Sasol were to build
the plant, it would represent the largest-ever inward investment
into the United States from Africa. Sasol and Livingston asserted
that this would undoubtedly jump-start the CTL industry in the U.S.


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Potential Show Stopper
----------------------

6. (U) Sasol and Livingston probed potential business and government
issues such as the SAG's possible attitude to outward investment in
the United States, competition with China for the first overseas CTL
plant, and environmental issues related to mining coal and to
emissions of sulfur and nitrogen oxides, particulate matter, and
carbon dioxide. It was agreed that carbon dioxide (greenhouse gas)
was potentially a "show-stopper", particularly given that Sasol
currently emits 70 million tons of carbon dioxide a year.

7. (U) COMMENT: Sasol's Secunda plant near Johannesburg is the
largest operating CTL facility in the world and is also "the largest
single point source of greenhouse gas emissions," according to a
recent submission to the South African Cabinet by the Department of
Environmental Affairs and Tourism. However, Sasol claims that the

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gas is concentrated at the plant and could relatively easily be
captured and stored under ground in a suitable geological formation
such as dolomite. It could also be used for enhanced oil
extraction. Sasol is working on identifying suitable sites and is
working with international partners on developing the technology
required for carbon dioxide sequestration. In this way, Sasol could
contribute to solving the global problem of carbon dioxide
emissions, which would also benefit the acceptability of coal-fired
power stations around the world.

TEITELBAUM

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