TCS Daily

Sasol's Potential Climate Solution

By Roger Bate - November 21, 2005 12:00 AM

SASOLBURG, South Africa -- During the Apartheid era, Sasol was the Afrikaner Parastatal synthetic fuel organization and a bastion of the nationalist state. Since it had no competition and was essentially pushing against the market, I was surprised to find that it has developed a viable partial solution to the carbon dioxide/climate conundrum, as well as providing some of the cleanest fuels on the market.

Set in the geographically unremarkable Sasolburg in the industrial heartland, Sasol's synthetic fuels arm was first developed when war and then isolation due to apartheid forced South Africa's best chemists to turn coal into liquid fuel. Sasol (The South African Synthetic Fuels Ltd), was so important to energy requirements that since there was nothing much in the location before the town was founded to house workers it was named after the company (or Parastatal as South African Government companies are known).

Now as fuel security becomes more important globally, with concerns about Middle Eastern instability, the recklessness of Hugo Chavez in oil-rich Venezuela, and expanding demand from China and India, the previously uneconomic coal-to-liquid-fuel process is increasingly attracting admirers.

Not least of the new suitors is the coal-rich State of Montana, where corporate interests are deep in discussions about a joint venture with Sasol. If the current price of oil is sustained, the technology certainly has great export potential for the South Africans. Coal-rich China is also apparently investing in the technology, and Sasol has already joined in partnerships with Qatar and Nigeria. It is possible that even with lower oil prices (anything above $25 per barrel, say South African experts) the technology may still be exportable and of high value since Sasol is coy about how much the process actually costs.

Although Sasol no longer receives direct subsidies from the government it does receive advantages in fuel price-fixing and other monopolistic regulatory gains, so it is hard to say what a fair price for its technology is. And many economists, me included, have been dismissive of it because of the opacity in pricing. But today with the massive overseas interest it appears that the technology is more than just an interesting scientific experiment. Sasol provides 28% of South Africa's fuel needs, making about 150,000 barrels of liquid fuels a day.

The liquid fuel is produced by the Fischer-Tropsch process which produces hydrocarbon fuels out of coal-derived gas. German chemists Franz Fischer and Hans Tropsch were awarded a patent for the process in 1925. Fischer visited South Africa in 1937 and its scientists' interest in the German process accelerated. Both Japan and US interests worked with the technology in the 1920s and 1930s but abandoned it, because it was hard to perfect and also, more importantly, because oil was in more plentiful supply and the technology was not obviously economic.

It might have died were it not for the Second World War and then South Africa's economically ridiculous, to say nothing of morally odious, Fascist/National Socialist tendencies from the first National Party Government in 1948 onwards. War-driven isolation and then determination to be self-sustaining in all areas of the economy, led to the process being developed and then sustained by the South African Government.

Through the cloudy times of South Africa's past, the silver lining of clean fuels (currently somewhat cleaner than the cleanest oil-derived fuels) was developed. Joint ventures with Chevron and other companies show that particulate matter, NOx and other pollutants, especially SOx, produced in the internal combustion engine, are lower in vehicles burning Sasol's fuels than with those derived from oil. And low sulfur is very important for protecting catalytic converters, which degrade rapidly in high sulfur environments. There is one other advantage -- Sasol collects carbon dioxide automatically during fuel derivation, which saves the cost of trapping the gas that would be required in other methods of fuel development (saving about $30 to $35 per ton of carbon).

At present they simply vent the CO2 into the atmosphere but it could be sequestered into an aquifer or a worked coal mine. Furthermore, it may be viable for the CO2 to be broken down further into carbon monoxide and oxygen which can be used to generate more synthetic fuel, if a CO2-free energy source, such as nuclear or solar, were used.

In the new real world of climate politics, where promotion of technological change is driving the process, such innovations are the future. Sasol was registered on the NYSE two years ago -- their shares might just be worth a look.


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