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Science/Tech See other Science/Tech Articles Title: Cheap gasoline from natural gas Brodrick is teasing the South African giant Sasol (SSL). Which is indeed one of the global experts on using the Fischer-Tropf process and other innovations to refine solid (coal) or gaseous (natural gas) energy sources into liquids. That’s not because they took off as global innovators who pursued this fantastic new technology, it’s because they used to be the state-controlled oil company in South Africa, and no one wanted to sell them crude oil under apartheid… so they had to come up with a way to use their abundant coal as an industrial and transportation fuel. And the story is certainly a very compelling one, at least in the big picture: The US has abundant and inexpensive natural gas and a fantastic gas distribution system, Sasol is building a huge liquefaction plant in Louisiana to refine and catalyze the gas into gasoline and other valuable chemicals, and gasoline and those chemicals are priced on the international markets so are much more valuable than the mostly-landlocked natural gas, which should create great profits. Brodrick quotes a “Pulitzer-Prize-winning journalist” as well, in calling it “one of the most improbable and important American business stories of the past decade.” That article is here, from the Wall Street Journal a couple months ago — just in case you’d like some confirmation or more background on the size of their operations. I’ve invested in Sasol in the past, back during the last oil runup in 2006-2008 or so, and haven’t looked closely at them very much since — but they are building that $20+ billion plant in Louisiana and they have built a similar plant in Qatar and have plans to expand globally. It is a more complicated firm than just these gas-to-liquids plants, though that’s part of their growth strategy — they still have huge operations at home in South Africa, and it’s a big company with a market cap approaching $40 billion. The stock is not particularly expensive, it trades at less than 11X expected 2015 earnings and pays a small dividend, and their balance sheet appears pristine — not sure where they’re getting the $20 billion to build these new plants, since they don’t currently have any net debt, but they do have the flexibility to add some debt to the balance sheet and they may have partners or government incentive smoothing the way as well. Sasol has said in the past that they need oil to be about 16X more expensive than natural gas for these plants to work (that’s presumably using the price/barrel for crude, and the NYMEX/henry hub price for natural gas per mcf, the two standard measures) — right now oil is a bit over $100 and natural gas is back down to $4 so that’s a ratio of about 25, well within their zone of profitability. Brodrick is pretty far outside the mainstream in his prediction of “90% growth in the coming weeks… 281% in the next few months… and 1,063% in the next couple of years” for this company — analysts are predicting that earnings will be pretty flat, about $5.46 for the just-ended fiscal year and $5.33 for the current year, and that the earnings will rise by less than 2% a year for the next five years. I don’t know who will be correct about that future growth (and it’s only two analysts providing those average estimates), but these are extremely long-term capital building projects, they are complicated, and Sasol does have a substantial amount of exposure to foreign currencies along the way. They have boosted revenues substantially over the past decade, but it definitely hasn’t been a straight line. So … that’s about all I can tell you in half an hour of catching up on Sasol — yes, they can make gasoline cheaper with natural gas than you can with crude oil, but that’s after this $37 billion company builds a $21 billion complex (and keeps building similar-sized operations in other areas and countries), and assuming that pricing dynamics remain friendly for the gas-to-liquids operations… it looks to me like it’s still a well-run company but not one that’s likely to see windfall profits overnight, and that it’s worth considering the risks of building these huge projects like their US plant in Louisiana and bringing them into profitable, steady operation. That’s just me and a few minutes of though and reading, though — it’s your money, so if you were to buy Sasol you’d want to understand it quite a bit better than that. So go forth, researchify for yourself, and come back and let us know: Is Sasol right for your portfolio? Do you think it’s going to return profits of 90% in “the coming weeks?” Just use the friendly little comment box below to share your thoughts. Poster Comment: paul hudek says: Siluria Technologies also claims to have an efficient method to produce ethylene and to convert the ethylene to gasoline or other fuels. They seem to have adequate funding. Oinky Bear says: Two companies, SASOL and Royal Dutch Shell, have technology proven to work on a commercial scale. PetroSA completed semi-commercial demonstrations of gas-to-liquids used by the company in 2011.[6] Royal Dutch Shell produces a diesel from natural gas in a factory in Bintulu, Malaysia. Another Shell GTL facility is the Pearl GTL plant in Qatar, the world’s largest GTL facility and there are reports that Shell is looking at the feasibility of a GTL facility in Louisiana, US.[7][8][9] SASOL has recently built the Oryx GTL facility in Ras Laffan Industrial City, Qatar and together with Uzbekneftegaz and Petronas builds the Uzbekistan GTL plant.[10][11][12] Chevron Corporation, in a joint venture with the Nigerian National Petroleum Corporation is commissioning the Escravos GTL in Nigeria, which uses Sasol technology. William F Tilson says: . With the successful engineering of the Tesla electric vehicle, I think we will have a middle class affordable electric car that can challenge a Mustang on Sunset Boulevard before any company can manufacture US$ 1.77 per gallon gasoline out of anything. 20 years ago, this might have been a bet, but today, thank God there are more than Republicans on the planet, and some of us actually believe in global warming – because we do not have some lobbyist paying us to not believe it, Michael L says: We bought our Tesla model S for $67,000 and got $5,000 back on our taxes. We got the smaller batter though. It cost hardly anything to charge and maintenence is practically zero. Instead of applying the huge disc brakes you just let the electric motor slow you down as it recharges the battery. The car is considered the safest car in America on the road. JR says: I was perusing this article and stumbled on the magic phrase: “Fisher Tropsch Process”. That always gets my attention. I don’t pretend to understand all of the GTL chemical science contemplated in this article since my background is M.E.. However, where the Fisher Tropsch Process is concerned, there is a whole ‘nuther universe of perspective to consider. I refer you to the book entitled “The Great Oil Conspiracy” authored by Jerome Corsi, PhD, who also is a columnist for an alternative news organization, WND. I have read the book a couple of times, because it took more than one reading for me to begin to fathom the implications of what can be postulated about the Fisher Tropsch process as explained in this book…the potential energy implications for our planet are quite incredible…but I leave it to you “serious” readers of this article to draw your own conclusions after reading the book. Enjoy! Incidentally, one of the takeaways I have from reading this book is it may explain where Russia is getting all of its oil and natural gas now, since Russia appears to have taken the Fisher Tropsch process to heart right after WWII, by grabbing up the technology from German scientists they carted off to Russia after they invaded eastern Germany to help end WWII. I don’t have time to explain much. The book is well researched and documented, with old WWII photos, as well. The basic theme is that hydrocarbons can be created deep inside the earth where pressures and temperatures are at levels required to naturally create hydrocarbons from iron and other elements, as defined in the Fisher-Tropsch equations. The fundamental theory is that hydrocarbons are naturally created by the earth and they “percolate” up into the crust where we “discover” them via drilling/fracking, etc. The theory (and perhaps the reality) is that we might never exhaust our hydrocarbons because the earth is continually creating more of them from below. Sound weird enough? If this idea sounds crackpot, then you would be well served to read the book and decide for yourself…that’s why I encouraged you to do so before. It sounds too unbelievable…but Hitler’s scientists appear to have developed the Fisher-Tropsch equations so he could create his own gasoline/diesel fuel from coal to fuel his armies/navies in WWII – because Germany had not much oil, but a lot of coal. Anyway, that’s all I have time for. If you really want to know more details, read the book. In my opinion, there is too much documentation and technical veracity for this to be nonsense. Reply Mark says: American Press on-line article is worthwhile reading on eight (8) companies – http://www.americanpress.com/The-eight-petrochemical-companies-fueling-upcoming-economic-boom Eight petrochemical companies — and possibly more — will build new plants or expand their existing facilities in Calcasieu and Cameron parishes, bringing thousands of job opportunities to qualified people in labor and management. 1.) Sasol 2.) Juniper GTL 3.) Cameron LNG 4.) Sabine Pass LNG 5.) Trunkline LNG 6.) Leucadia 7.) G2X Energy 8.) Magnolia LNG Some will build new liquefied natural gas plants; others will expand their LNG production and begin exporting. One company will refine natural gas into gasoline; another will harness the science of “cracking” ethane molecules to produce ethylene, a gas compound found in many of the products we use every day. When taken in the aggregate, the estimated $47 billion in projects have many state and local officials predicting an economic boom for Southwest Louisiana. mandrover says: Why is it OK to misuse our natural resources simply because it is going to create jobs???? Since you are mentioning actual companies…….take a look at Genoil. They have the technology to upgrade Fuel Oil (to meet new maritime requirements) at a fraction of the cost that is required by traditional refining. This technology can also be used for upgrading Oil Sands. However; upgrading Oil Sands is not cost effective and may not ever be cost effective, since solar wind and waves will probably become more cost efficient than Oil Sands unless some break through technology comes along first. Reply Mark says: July 21, 2014 at 3:31 pm American Press on-line article is worthwhile reading on eight (8) companies – http://www.americanpress.com/The-eight-petrochemical-companies-fueling-upcoming-economic-boom Like(2) Reply Mark says: July 21, 2014 at 3:41 pm Eight petrochemical companies — and possibly more — will build new plants or expand their existing facilities in Calcasieu and Cameron parishes, bringing thousands of job opportunities to qualified people in labor and management. 1.) Sasol 2.) Juniper GTL 3.) Cameron LNG 4.) Sabine Pass LNG 5.) Trunkline LNG 6.) Leucadia 7.) G2X Energy 8.) Magnolia LNG Some will build new liquefied natural gas plants; others will expand their LNG production and begin exporting. One company will refine natural gas into gasoline; another will harness the science of “cracking” ethane molecules to produce ethylene, a gas compound found in many of the products we use every day. When taken in the aggregate, the estimated $47 billion in projects have many state and local officials predicting an economic boom for Southwest Louisiana. Tatarewicz: Natural gas may get a price boost as more power plants use it to generate electricity. Conference in Calgary, Canada Tuesday considering getting off coal which provides half of Alberta's power but pollutes the air. Post Comment Private Reply Ignore Thread
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