South African chemicals and energy company Sasol Ltd. said it could spend up to $21 billion to build a complex in Louisiana to turn natural gas into chemicals, diesel and other fuels.
The company said Monday that it will begin initial engineering work on a long-discussed complex in Westlake, La., that will use domestic natural gas, which is among the cheapest in the world, to make higher-value chemicals and fuels.
"We can monetize these gas resources in North America," said Sasol CEO David Constable in an interview.
A final decision on the project — and its final expected price — won't be unveiled until 2014. The complex, if built, will employ 7,000 construction workers during peak construction and 1,200 permanent workers, the company said.
The company expects to spend $5 billion to $7 billion on a chemical plant and later add an $11 billion to $14 billion gas-to-liquids plant that will turn natural gas into diesel. Sasol's estimated cost has risen recently by nearly $6 billion because it decided to go ahead without a partner and to expand the number of chemicals and other products the complex can make.
The chemical plant would begin operation in 2017, and the diesel plant would come on line in two stages beginning in 2018 and 2019. The diesel plant would produce a total of 4 million gallons of diesel per day.
Constable cited the low price of natural gas, the high price of oil, Sasol's strong balance sheet, and lucrative tax incentives from the state of Louisiana as reasons to begin work on the project.
"We want to grow," he said. "We want to go to regions where we can leverage our proprietary technology."
Sasol has long turned coal, which is abundant in South Africa, into liquid fuels. It can also use the process to spin the carbon and hydrogen in natural gas into more complex hydrocarbons that fetch higher prices because of the high price of oil.
Other chemical companies have announced plans to expand operations in the U.S. or build new ones that use natural gas as a feedstock to take advantage of U.S. natural gas prices, which have been half or below what they are in Europe and Asia.
U.S. drillers have learned to unlock enormous amounts of natural gas from shale formations under several U.S. states, which has driven down the price and given companies confidence that the price could stay relatively low for years to come.
Royal Dutch Shell, which operates an enormous gas-to-liquids plant in Qatar, is also considering building a similar plant in the U.S.