The Hindu Business Line : Sasol ready to invest $6 billion

Liquefaction project
If the project comes through it will be the largest FDI in India
Initial testing will cost around $300 million
Assam coal is best for coal liquefaction due to its composition

Mumbai , Oct. 14

South African petrochemical major Sasol Ltd has approached the Union Ministry of Coal with a $6 billion (around Rs 27,000 crore) investment proposal for a coal liquefaction project. If the project comes through, it will constitute the largest foreign direct investment in India.

However, Sasol will make this investment provided it is allotted a coal block in India with reserves of at least 1 billion tonnes, said an official with the Ministry of Coal. Coal liquefaction involves the conversion of coal into diesel, naphtha and other liquid fuels.

Precondition

Once Sasol's precondition is fulfilled, it will undertake initial testing, which itself will cost $300 million (around Rs 1,400 crore). A study of the test results could lead to a solid offer from the company, said the Ministry official. Sources in the Ministry said that there are not many coal blocks in the country with such high reserves.

Assam coal is best for coal liquefaction due to its composition, about 90 per cent of the coal being directly convertible into fuel. The State has about 900 million tonnes of coal reserves. But, mining would be a very difficult task in that region, the terrain being steep; and there could be environmental and security issues as well, said officials.

Some of Assam coal is currently sold to Punjab for industrial purposes. Rather than burning it in a furnace it can be converted into oil, which yields a five-fold value addition, they said. Last year, in the wake of rising crude prices, the Ministry had been directed by the Government to conduct a feasibility study on the introduction of the concept and technology of coal liquefaction in the country.

`Unique Technology'

The Government had had talks with Sasol, which was then not ready to part with the technology, said Ministry officials. The coal liquefaction technology is available with only a handful of companies in the world, they said.

In fact, the Coal Ministry had sent an expert committee to Sasol as early as 2000 and had come up with a report the following year, recommending the setting up of a task force. Coal India Ltd at that time was asked to float a tender seeking Expressions of Interest for the liquefaction technology. However, there was no response to that, said Ministry officials.

Now, Sasol's willingness probably follows the Prime Minister's recent visit to South Africa, said officials, adding that the challenge was to now fulfil Sasol's precondition.

"We are looking at their proposal. We are also trying to locate suitable coal blocks," said a Ministry official.

Synthetic fuel oil from coal will be cheaper than crude oil. When crude oil cost is at, say $60 per barrel, synthetic oil will cost $46 per barrel, said officials.

Also, the value addition is from coal conversion is five times more, and this makes coal liquefaction a profitable venture, they said.

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