New Investment Opportunities Emerge As Natural Gas Prices Fall
A few years ago, a major price differential emerged between oil and natural gas; that differential is now expected to persist for decades. As new technologies allowed for the capture and use of natural gas, market rates for this resource fell to historically low levels. Across the nation, manufacturers cut their operating costs by relying on natural gas to power their equipment, machines and vehicles. With an abundant supply of this resource available in the U.S., the stage was set for a renaissance in America’s industrial sector.
South Africa-based Sasol Limited, one of the world’s leading energy companies, identified the natural gas windfall in the U.S. as an opportunity for growth. The company was eager to expand its operations in the U.S. and increase its capacity for energy production.
Sasol executives and engineers developed plans for an integrated gas-to-liquids (GTL) and ethane-cracker complex, capable of producing high-quality transportation fuels, including GTL diesel, as well as other value-added chemical products. The GTL facility would be the first-of-its-kind GTL facility in the U.S.
In order to pursue such an investment, the company required several critical resources to be successful. The operation needed a solid energy infrastructure, access to interstates and highways, port facilities and several hundred acres to support such a large undertaking. The company also required a skilled and highly capable workforce and an investment-friendly business environment.
Sasol Finds The Right Location In Louisiana
In late 2010, having recently announced an expansion — the world’s first ethylene tetramerization unit — at its Lake Charles Chemical Complex, executives from Sasol North America once again turned their attention to Louisiana.
In early 2011, LED’s Business Expansion and Retention Group (BERG), partnered with the Southwest Louisiana Economic Development Alliance and the Port of Lake Charles to identify potential sites for Sasol in Southwest Louisiana.
In their search for potential locations, LED officials and their partners gathered site data for the region. They leveraged that data with Geographic Information System (GIS) mapping technology to complete site-suitability analyses of multiple properties in the region. They ultimately located a 650-acre site that would meet the proposed project’s needs. By leveraging the assistance of the Port of Lake Charles in identifying this location and supporting the required infrastructure upgrades, LED saved the company at least six months of time developing the property.
“The old way of selecting a site for a major plant was to send a guy out in a pickup truck with a dumpy level and to survey what was going on,” said Sasol’s André de Ruyter, senior group executive: Global Chemicals and North American Operations. “The GIS technology has enabled us to short circuit that approach and come up with a good site that will meet all of our requirements in a time space that is 6 to 12 months shorter than the traditional approach would have been.”
In September 2011, Sasol officials announced plans for a final feasibility study of the location.
Manufacturing Training Facility Targeted To Sasol’s Needs
As final feasibility studies took place over the next year, LED and its partners continued to collaborate with Sasol representatives. Together, they developed solutions to support Sasol’s GTL and ethane cracker complex.
The state’s incentive package provided Sasol with a performance-based grant of $115 million for land acquisition and infrastructure costs associated with developing the site. Sasol also qualified as the first company to receive the Competitive Projects Payroll Incentive for GTL projects, which provides a payroll rebate of up to 15 percent for each GTL job for the first 10 years of operations.
To address the company’s needs for a workforce trained in the necessary GTL skills, the state is funding a $20 million manufacturing training facility. The primary focus of the facility will be to provide industrial technology training to potential Sasol employees. The facility will be located at the SOWELA Technical Community College in Lake Charles. The training center will meet the training needs of Sasol, and once Sasol’s initial needs have been met, the facility will serve the broader needs of manufacturers throughout the region.
Finally, the state offered Quality Jobs payroll and tax incentives on the ethane-cracker portion of the project, and Industrial Tax Exemption incentives for the entire project.
“Working with Louisiana Economic Development has been really a pleasure for us coming in as investors into the state of Louisiana,” said de Ruyter. “We’ve found them to be very businesslike, very focused, very supportive, and also very understanding of the needs of a major investor.”
Sasol Green-Lights Largest Investment In Company History
In December 2012, Sasol executives finalized their commitment to Louisiana, and announced the investment of $16 billion to $21 billion in its integrated GTL and ethane-cracker complex, the largest manufacturing project in Louisiana history. The company expects to employ more than 1,200 people in direct jobs at the facility, with salaries averaging nearly $90,000 per year, plus benefits.
The first-of-its-kind GTL facility will be instrumental in supporting America’s energy independence, as it will produce high-quality transportation fuels. The GTL project will be constructed in a dual-phased approach, with operations expected to begin in 2017. Once both phases are online, the facility will produce an estimated 96,000 barrels per day.
The ethane cracker will produce 1.5 million tons of ethylene annually. Ethylene is one of the chemical industry’s key components for alcohol-and plastics-based products, including solvents, surfactants and polymers.
“This project represents a real game changer for Sasol,” said de Ruyter. “It is not only the single largest investment that the company has ever made in its entire history of more than 60 years, but it also represents a step out into a new field for us.”