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South African syngas allays oil supply worries, but at an environmental cost

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South Africa has been producing coal-to-liquid synfuels for the past 50 years. What started as a state-owned enterprise quickly became a commercial cash cow when the regime changed hands in 1994. Now, the company that’s been producing the synfuels locally has become the world leader in coal-to-liquid fuel technology – but not so much in environmental sustainability.  Diana Neille reports from Johannesburg, South Africa.

AMBI: “How did you get inside here?”

DIANA NEILLE: A fortress of enormous proportions…It dominates the lush surrounding highveld of South Africa’s Mpumalanga. Its 3.4 square mile perimeter is strictly guarded, and access is limited. Even taking a photograph of Sasol’s petrochemicals plant in Secunda is considered grounds for arrest.

AMB: “OK, come to my office please.”

NEILLE: And that’s been the case, since it was built in the mid-70s by the previous Afrikaaner nationalist regime, back in the days of apartheid.

Terence Creamer is the editor of Engineering News in Johannesburg. He says there used to be a reason for the tight security.

TERENCE CREAMER: Sasol was always a target. If you try and go into Sasol it’s still considered a national key point and you know, the liberation songs during that era were a lot about trying to take out Sasol … and those sort of facilities. So it was always protected by the apartheid government.

AMB: Protest song

NEILLE: Creamer says that that the need for synfuels arose as a result of apartheid itself.

CREAMER: It really emerged from a security of supply concern, back when South Africa was not really a favored nation in the world. And they looked at this massive coal resource, and they looked at a technology that was available in Germany, called Fischer-Tropsch.

NEILLE: It’s a process Sasol has since pioneered.

AMB: Crickets chirping

NEILLE: At his home in a quiet suburb of Johannesburg, chemical engineer and oil industry analyst Keld Rasmussen, explains Sasol’s success.

KELD RASMUSSEN: Operating commercially in the world right now, there are no other synthetic fuels processes.

NEILLE: Sasol’s a much smaller fuel producer compared to industry giants BP and Shell. But it works with an entirely different substance. Coal.

RASMUSSEN:The Sasol process consumes over 40 million tons a year of coal, to produce about 7million tons a year of fuel and chemicals.

NEILLE:  And as Engineering News’ Terence Creamer points out, when you consider South Africa’s heritage and its natural resources, that’s worked out perfectly.

CREAMER: Not many countries have taken their coal and converted it into fuel… it only really made sense in South Africa because of the security of supply worries, and the apartheid era … and really the desire to have fuel independence in South Africa.

NEILLE: The country imports around 70 percent of its crude oil. But Creamer says the 30 percent Sasol produces makes a big difference.

CREAMER: We are geographically distant from markets, because we sit at the bottom tip of Africa. So having inland plants that can convert the coal resources that are inland, lowers the logistical costs and it ensures security of supply. So Sasol does play an important balancing role.

NEILLE:Industry analyst Keld Rasmussen says it’s a mutually beneficial arrangement.

RASMUSSEN: The enormous capital cost of Secunda … is long gone. And the operating costs are actually quite low. Probably below 20 dollars a barrel. So clearly being able to produce your own fuel at 20 dollars a barrel is a lot better than importing crude oil from Iran at 100 dollars a barrel.

NEILLE:Rasmussen adds that it’s also created 30 over thousand jobs and is local value-add rather than imported value-add.

But it’s not beneficial across the board. South Africa is one of the largest emitters of carbon dioxide per capita in the world. And although it’s trying to cut down, Rasmussen points out that Sasol is a huge contributor.

RASMUSSEN: I’m not kidding. Sasol produces more CO2 than BP. BP produces 4 and a half million barrels a day of oil. Sasol produces not even 200 thousand. They hate it when I say this stuff.

NEILLE:Sasol has managed to reduce its emissions over the years. But because of the nature of the coal to liquid process, it’s still releasing three tons of carbon dioxide into the atmosphere for every ton of fuel and chemical it produces.

CREAMER: There are a lot of programs underway within the company to try and reduce that footprint, because they know that’s the Achilles Heel of that process. The process allows for carbon capture. The problem is that at this stage in SA there’s no storage solution.

NEILLE: Creamer says international pressure will eventually take its toll on coal to liquid fuel production. A more sustainable solution is gas to liquid synfuels, which Sasol already produces.

CREAMER: There’s an understanding that our process to produce fuel, the fuel that we use, is carbon intensive. On the other hand we are very sensitive to the issue of having to import oil to refine… So there’s a very big economic benefit to converting the coal into fuel.

NEILLE: A conundrum Sasol’s clearly grappling with behind its firmly closed doors. And as the world takes on the question of alternative fuel supplies, it’s one which no doubt will be at the forefront of many sustainability and mining technology debates to come.  For Wyoming Public Radio, I’m Diana Neille in Johannesburg, South Africa.

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