Mossgas (Pty.) Ltd.'s gas-to-liquids plant in Mossel Bay, South Africa, has been criticized as being a "white elephant"; that is, something that costs more to keep than it is worth. The image, however, is unwarranted. Under normal market conditions, Mossgas is a cash-positive operation that doesn't depend on state subsidies. Like Sasol Ltd., it receives tariff protection only when the oil price drops below a certain level, which is determined by the government.
In the recent past, Mossgas focused on sustaining its natural gas feedstock supply. In 1998, it finally got government approval to produce gas from offshore EM field, which is expected to provide the plant with feedstock until 2006.
With the feedstock question at bay, Mossgas has turned its attention to long-term cash flow.
Because the high-temperature Fischer-Tropsch (HTFT) process it licenses from Sasol makes olefinic products, Mossgas intends to realize opportunity by diverting some of its synfuel products into petrochemicals. Specifically, Mossgas has its eye on acrylic acid production.
But Sasol has other ideas.
A licensing agreement
The two companies have been in discussions to resolve an attempt by Mossgas to unbind itself from part of the licensing agreement. Mossgas disputes the part of the license that prohibits it from producing petrochemicals with the Sasol process.
Mossgas contends the licensing agreement restricts its ability to increase revenues. It needs the diversification into petrochemicals as a means to attract private investors.
When Sasol licensed its HTFT process to Mossgas in 1986, both companies were at least partially state-owned. At that time, it was in the interest of the government to limit the country's dependence on imported oil.
Today, the situation has changed. Since apartheid ended in 1994, there seems to be no need for fierce protectionism.
Dave Day, chief executive of Mossgas, is convinced that the license issue can be amicably resolved. In the interest of his company, he said, "We must pursue all avenues to secure the right to optimize our business and exploit our competitive advantage in world markets on an equal and fair basis."
What if?
What if Mossgas doesn't win?
"We have several alternatives in the unlikely event that Mossgas is not successful in this case," said Kobus Terblanche, technical and development manager. "We have options in both fuels and petrochemicals."
Mossgas could use its low-sulfur, low-aromatics gasoline in niche markets, if the fuel is properly marketed. Distillate from its own COD (conversion of olefins to distillates) process is another high-quality product that can be marketed as chemical fluids.
The company has also considered innovative ways to boost revenue, which include selling natural gas or expanding as a refinery.
And the company does not completely rule out petrochemicals. A methanol plant would allow the firm to develop petrochemical products without violating the Sasol agreement. The use of olefins produced from alternative feedstock via fluid catalytic cracking is another possibility.
