Sasol coal-to-oil plant planned in China ditched

By DAVID WINNING: THE WALL STREET JOURNAL ASIA: August 29, 2008

BEIJING -- South Africa's Sasol Ltd. said Thursday it was scrapping one of its two proposed coal-to-liquids projects in China, after Beijing indicated it was scaling back a drive to produce synthetic fuels from its largest energy source.
Sasol said it was no longer proceeding with plans for a CTL project in the northern province of Shaanxi and would focus fully on a feasibility study of a plant in the neighboring Ningxia Hui autonomous region, with a capacity of 80,000 barrels a day.
The proposed site at the Ningdong Chemical and Energy Base has excellent infrastructure and a significant amount of preparation work has already been completed, Sasol said, adding the project has the full support of Ningxia Gov. Wang Zhengwei.
Sasol is joining Shenhua Ningxia Coal Group, a unit of big Chinese coal miner Shenhua Group, in the Ningxia project study.
"This strategy aligns with a recent notice issued by the National Development and Reform Commission," Sasol said. The commission is China's economic planning agency.
Although there has been no official confirmation of a new national policy on CTL in China, a notice on the Web site of Ningxia's planning body Thursday said China would only allow two projects to proceed and all others should be put on ice.
Regarding its other feasibility study for a CTL plant in Shaanxi, which would no longer proceed at this stage, Sasol said Shenhua and itself would maintain the good relationships with the province which have been established over many years.
The two projects are Sasol's proposed facility in Ningxia and Shenhua's wholly owned plant in Erdos city in Inner Mongolia, which has a planned annual output of 1.08 million metric tons in its first phase before ramping up to three million tons.
Shenhua's plant is due to be commissioned next month. If confirmed, China's new policy on CTL projects will deal a blow to other foreign investors seeking access to the country's growing market for transport fuels by liquefying coal.
Write to David Winning at david.winning@dowjones.com