Introduction to Coal To Liquid (CTL) and Sasol
The Tata- Sasol Joint Venture has been working to set up a massive $10 billion coal to liquid (CTL) plant in India’s Orissa state with a capacity of 80,000 barrels of oil per day. South African petrochemicals giant Sasol is the world leader in coal to liquid (CTL) and gas to liquid (GTL) technologies which converts natural gas and coal into petroproducts like diesel , naptha etc. This technology was pioneered by Sasol in 1955 when it built the first big plant of its kind at Sasolburg in South Africa.Its Secunda plant in South Africa with 160,000 barrels of day capacity is the world’s largest facility of its kind and provides for a significant portion of South African motor fuel demand.Sasol is also partnering with Qatar and Chevron to build the first large scale commercial Gas to Liquid plant in Qatar.
Pros and Cons of Coal To Liquid (CTL) Technology
High oil prices and the relative abundance of coal over oil deposits has been the major driver for CTL projects.Sasol has managed to earn huge profits in 2008 due to high oil prices as its raw material coal costs remained at a low,fixed rate.The proposition of high oil prices in the future has made it an attractive project of the Tata Group .However the huge project costs($5-10 Billion) and long gestation times (around 10 years) has made it a niche technology.Sasol is also collaborating to set up a similar sized Coal to Liquid (CTL) in China as well.However I think that this project might not the most effective use of India’s scarce land and mineral resources.Note that one of the primary reasons behind building the Secunda plant by Sasol was the oil embargos faced by South Africa due to its apartheid policies. Coal to Liquid (CTL) Technology might make sense from the profitability point of view and may have some specific niche applications but large scale usage is a waste of resources in my view.Here are the some reasons as to why.
- It will use up 3000 acres of land in Orissa where Land is a precious and scarce resource.Mega projects like that of the Posco steel plant are facing civil rights agitation due to Land problems
- The conversion of coal into liquid to generate energy will be much less efficient than using coal to generate energy.Instead of coal to power Vehicles through liquid fuels,it would be much more energy efficient to power Electric Vehicles (EV) through coal generated electricity
- Tata and Sasol will set up the 80,000 barrels per day project at an estimated cost of $10 billion.Setting up an equivalent oil refinery would cost much less.Though not an appropriate comparison,it shows you that the high capex cost required to convert coal into liquid than the normal processing of crude oil into petro products.
Sasol Ltd., the largest producer of motor fuel made from coal, plans to spend $10 billion in India in partnership with the Tata Group, following similar investments in Indonesia and China.
The South African company plans to produce 80,000 barrels a day of motor fuel by 2018 from a coal block in the eastern state of Orissa, Mark Schnell, president of the company’s Indian unit, said in a interview in Mumbai today. Sasol and India’s Tata Group own equal stakes in the venture, he said.
“It’s going to be a mega project of the magnitude of $10 billion by the joint venture,” Schnell said. “At this stage, the focus is on understanding the resource and making sure of the economics of building a plant here.”