Low oil prices and a volatile market are prompting a South African energy and chemical company to drop plans for an $11 billion to $14 billion U.S. plant to convert natural gas to liquid fuels and to pull out of Canadian shale.
"Sasol will not invest in further greenfields gas-to-liquids projects," the company said Thursday in a news release posted on its website. Its current GTL plants "are generating good returns and cash flows," but new projects aren't worth it in the current market, the statement said.
The company had announced in January that it was delaying final investment plans for the plant near Lake Charles because of a collapse in world oil prices.
"I hate to see ... that the gas to liquids project is not being able to happen," but it's a minor setback in $100 billion in development across southwest Louisiana, said Calcasieu Parish Police Juror Hal McMillin. He said that includes an $11.1 billion ethane cracker being built by Sasol, which has an ethylene plant, an alumina plant and an alcohol plant operating in the area.
The ethane cracker will turn a component of natural gas into ethylene, used in the chemical industry. State officials have said it is expected to create 500 permanent jobs, with construction jobs peaking at 5,000.
"Sasol is still doing a number of great things in southwest Louisiana," said McMillin, who worked for 23 years at a plant originally owned by Conoco, then by Vista, and now by Sasol.
The company has more than doubled its permanent workforce in Louisiana, from 450 to nearly 1,000 jobs averaging $80,000 a year, Don Pierson, secretary of Louisiana Economic Development, said in an emailed statement.
"Through Sasol-sponsored training, more than 1,500 entrepreneurs have been trained and counseled about small business opportunities to work with the new complex of seven chemical plants that will begin coming online in the second half of 2018. That small business effort has helped generate some $7.6 million in new capital invested by local entrepreneurs, along with 43 new business startups, creating 163 new small business jobs," he wrote.
Sasol said it will sell its shale assets in Canada's Montney Basin because a review of more than half its global assets found Canadian shale gas to be "non-core."
"The majority of the company's assets will be retained and clear improvement actions have been defined for each," it said.