WESTLAKE, LA.: In an ambitious bet that the glut of cheap natural gas in the United States will last for many years, a South African energy company announced Monday that it would build America’s first commercial plant to convert natural gas to diesel and other liquid fuels.
The company, Sasol, which is based in Johannesburg, has been a pioneer in a technology that has tantalized energy scientists for decades over its potential to produce liquid fuels without using oil, which historically has cost far more than natural gas.
Having already built smaller plants in South Africa and Qatar, Sasol has designed its new Louisiana plant to produce 96,000 barrels of fuel a day using its “gas to liquids,” or GTL, technology. It will be the second-largest plant of its kind in the world, after Royal Dutch Shell’s Pearl plant in Qatar, and will cost $11 billion to $14 billion to build.
“By incorporating GTL technology in the USA’s energy mix,” David Constable, Sasol’s chief executive, said in a statement, “states such as Louisiana will be able to advance the country’s energy independence through a diversification of supply.”
The facility will include a gas processing plant, a chemical plant and a refinery. All are required to perform the alchemy of converting natural gas into diesel, jet fuel and other chemical products.
What makes this southwestern corner of Louisiana attractive to Sasol is its proximity to bountiful shale gas fields just north and west in Texas. A boom in shale drilling has reduced the price of natural gas in the United States in the past four years by more than two-thirds, encouraging many energy and chemical companies to build and expand manufacturing plants around the Gulf of Mexico to produce a variety of petrochemicals.
Sasol estimated that the plant would create at least 1,200 permanent jobs and 7,000 construction jobs. Production is scheduled to begin in 2018. The state encouraged the project with more than $2 billion worth of tax credits and other incentives.
The company said it would put off previously announced plans to build a separate gas-to-liquids plant in Canada, giving priority to the Louisiana effort.
Profits have been elusive for the technology. To make it work, natural gas prices must remain low and prices for oil, diesel and jet fuel must remain high for a prolonged period. Natural gas and diesel prices historically have been very unpredictable.