While South Africa grapples with the security of its future liquid fuels supply, the question of whether it should invest in new coal-to-liquids (CTL) capacity has once again reared its head.
On the cards is Sasol’s proposed Mafutha project, which will extend the petro-chemical giant’s existing operations — turning coal and some gas into petroleum products — by an additional 80 000 barrels a day. It is being considered alongside PetroSA’s proposed Mthombo project — a new crude oil refinery to be built at Coega.
The department of energy has stated that it is “considering both projects”, though it would appear that there is more momentum behind the building of Mthombo, in part at least because the project is more advanced.
PetroSA has completed the full feasibility study for Mthombo and is awaiting the go-ahead to begin with front-end engineering and design (FEED), the next phase of the project. Mafutha is still only at pre-feasibility stage, according to a statement from Sasol.
In addition, the company said, “extensive government involvement is essential, as a partner and as a provider of investment incentives”, and it is still waiting for the outcome of work by the government on these issues. So Mthombo could come on line much sooner than Mafutha and work to meet the looming supply gap.
By 2016 South Africa will be facing a shortage of 120 000 barrels of liquid fuels a day, according to the department. But the costs of extending CTL capacity versus building a new refinery and growing environmental concerns are also among the issues that government is grappling with.
The choice between the two major projects also feeds into larger questions of the security of supply, according to experts. A new refinery, such as Mthombo, would still leave South Africa partially reliant on access to crude oil from the international market.
But a CTL plant, which relies on the conversion of abundantly available coal, could ensure that a larger part of the country’s liquid fuel needs were met by local production. According to government’s Energy Security Master Plan for liquid fuels, it is recommended that at least 30% of finished petroleum products be manufactured from indigenous raw materials.
South Africa produces about 30% of fuel locally from Petro-SA and Sasol’s current operations combined, according to the department. But Bheki Khumalo, the spokesperson for the department, said that choosing to build Mafutha could leave South Africa short of the fuel supplies it needs.
“We have to take into account the fact that if we are to have Mafutha then we are going to import the product, as Mafutha only has the capacity to provide the country with 80 000 barrels of liquid fuels per day,” he said. “This is the case because by 2016 we estimate that we will have a shortfall of 120 000 barrels per day of product. This will invariably create a gap of 40 000 barrels per day.”
The cost of building Mafutha is another concern. “There is also a contrast between producing 80 000 barrels at an estimated amount of R160-billion [for Mafutha] as opposed to spending approximately R110-billion to produce 360 000 barrels [Mthombo],” he said. Environment costs are another concern and South Africa will have to factor CO2 emissions into a project such as Mafutha.
Sasol has said that “a commercially viable carbon capture and storage solution is required to achieve Sasol’s CO2 reduction targets for project Mafutha.” But a solution is, as yet, not available. Sasol also noted that the coal for such a project needs to be of suitable quality and it is still extracting and testing bulk samples.
According to the departments, there are other implications for the environment, including the availability of water. The CTL process requires abundant water resources, while South Africa is a water-scarce country.