South Africa-based energy and chemicals company,
) plans to build a plant in Louisiana to convert natural gas to
diesel, chemicals and other liquid fuels. Estimated cost of the
project is around $21 billion.
The project will comprise a gas processing plant, a chemical
plant and a refinery. It is anticipated that the company's
Louisiana plant will produce around 96,000 barrels of fuel per
day by implementing its gas to liquid (GTL) technology.
Expenses for the chemical plant are likely to be in a range of
$5-$7 billion along with an additional $11-$14 billion for the
GTL plant. The chemical plant will come on line in 2017 while the
diesel plant will begin its operations in two phases in 2018 and
The upcoming facility will be the second largest in the world
Royal Dutch Shell plc
) plant in Qatar.
Sasol is the leading provider of liquid fuels and a major
international producer of chemicals. The group divides its
operations in these segments: South African Energy Cluster,
International Energy Cluster and Chemical Cluster.
We believe that Sasol's deleveraged balance sheet and strong cash
position keeps the group well equipped to weather the global
economic storm and fund its growth program in tough credit
With gas prices remaining at depressed levels and thereby
diverging significantly from oil prices, Sasol - through its
upstream North American shale gas investments - is looking to
utilize the spread by using its GTL technology. This is expected
to be more profitable than the company's traditional business of
producing motor fuels from coal. The company's major GTL ventures
are progressing on schedule and are expected to show results by
the end of 2012.
However, we believe that the company conducts operations in many
countries and is exposed to risks associated with doing business
abroad. Such risks include embargoes and/or expropriation of
assets, exchange rate risks, terrorism and political/civil
sentiment and others.
We maintain a long-term Neutral recommendation on the stock.
Sasol currently retains a Zacks #3 Rank (short-term Hold rating).
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