(Updates with company comment in fourth paragraph, shares.)
Nov. 30 (Bloomberg) -- Sasol Ltd., the largest producer of motor fuel from coal, said it will proceed with a feasibility study to build an ethane plant at its Lake Charles site in Louisiana for an estimated $3.5 billion to $4.5 billion.
The study is scheduled for completion in the second half of the 2013 financial year, which ends in June, the company said today in a statement.
Ethane is a natural-gas derivative used to make ethylene, an industry bellwether for plastics, and the plants that produce the substance are known as crackers. The facility, with a planned capacity of 1 million metric tons to 1.4 million tons of ethylene a year, would allow the company to expand its chemical business, it said.
Dow Chemical Co., the world’s biggest ethylene producer, said Oct. 27 that it expected competitors to close or idle ethylene plants due to low demand and margins. Sasol will use “differentiating technologies” to produce products from ethylene competitively at the complex, André de Ruyter, senior group executive of operations, said by phone, declining to elaborate.
It will also enjoy “huge value-add” by building the plant on the same site as a planned gas-to-liquids plant. “It gives us huge synergies to integrate the plants at one site,” De Ruyter said on the conference call. “We already have access to the land and incentives from local government.”
The company believes “strategic growth in chemicals will take full advantage of the natural-gas opportunities along the U.S. Gulf coast and the anticipated growth will strengthen Sasol’s overall portfolio,” Chief Executive Officer David Constable said in a separate statement.
Sasol has started discussions to “potentially divest” its stake in Arya Sasol Polymers Co. in Iran, the company said. Sasol and Pars Petrochemical of Iran, a unit of the state-owned National Petrochemical Co., both own 50 percent stakes in Arya, with a design capacity of 1 metric tons of ethylene.
Further announcements will be made “once sufficient progress has been made on these discussions,” it said. Sasol said in a regulatory filing to the U.S. Securities and Exchange Commission in October that it is reviewing operations in Iran given U.S. and European Union sanctions against the country.
De Ruyter declined on the call to elaborate on the difficulties it may face exiting the business or taking proceeds of a sale out of Iran, saying the information is commercially sensitive. The company is following rigorous processes to ensure it remains compliant with sanctions requirements, he said.
“The indication at this stage is that the sanctions will have no impact on other operations” outside Iran, he said.
Sasol jumped 5 percent to 389.13 rand in Johannesburg, its highest closing price since April 8. The FTSE/JSE Africa All Share Index rose 3.7 percent.
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