Wednesday, September 14, 2011

Gas-to-Liquids Plant Coming to LA?

Yesterday, Sasol, Ltd. of South Africa announced yesterday that it has chosen a site in southwest Louisiana near Westlake in Calcasieu Parish for a gas-to-liquids facility.  The facility has to go through an 18 month feasibility study stage before advancing, but the site selection process has concluded.  The facility would be the first GTL plant in the U.S. and would be located near a Sasol Ethylene Tetramerization unit that is also proposed for Calcasieu Parish.  (More info on GTL from Sasol)

The GTL process turns natural gas into diesel and jet fuel that can be used without engine modifications.  The big question is economics.  There are existing GTL plants in places like Qatar, but the most important economic variable is the low cost of natural gas. In a market economy like the U.S., it is unlikely that the company can lock in long-term gas prices, so the feasibility of the project remains to be seen.  I'd love to peek behind the curtain to see the economics.  What this announcement does say to me is that Sasol expects natural gas prices to remain low for quite a while.

In any case, this would be a big deal for Louisiana.  If deemed feasible, the projected cost of the facility would be between $8 and $10 billion with 850 permanent jobs and a peak of 5,000 construction jobs.  This is another opportunity for the state and region created by our wealth of natural gas from the shale.

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