Sasol Ltd., the world’s largest maker of motor fuels from coal, will pay C$1.05 billion ($1.03 billion) for a stake in Talisman Energy Inc.’s Canadian shale- gas assets and may build a motor-fuels plant in the country.
The two agreed to study “the economic viability of a facility in western Canada to convert natural gas-to-liquid fuels,” Johannesburg-based Sasol said in a statement today. “This could provide a strategic alternative to traditional North American pipeline or liquefied natural gas marketing.”
Sasol uses its Fischer-Tropsch technology to transform gas from below the ocean floor and coal into liquid fuels such as gasoline and diesel in South Africa and Qatar. Rising prices and advances in extracting shale gas have spurred the company’s interest in developing plants to convert the gas.
The transaction appears to be “well thought through,” Abri du Plessis, chief investment officer at Cape Town-based Gryphon Asset Management Ltd., said by phone today. “The market has been waiting for a catalyst to move the price” of Sasol.
The deal will give the South African company 50 percent of Talisman’s Farrell Creek operations in the Montney Shale basin in northeastern British Columbia. The 51.6 acre site holds an estimated 9.6 trillion cubic feet of shale gas, Sasol said.
Sasol, which built the world’s first commercial gas-to- liquids plant in Qatar, is studying shale gas in South Africa’s Karoo region with Chesapeake Energy Corp. and Statoil ASA. Exxon Mobil Corp., Mitsubishi Corp., Reliance Industries Ltd. and Sumitomo Corp. are also expanding into shale gas as conventional energy reserves shrink. Fuel from natural gas is cleaner than that made from oil, allowing producers to charge higher prices.
New technology has made shale gas economically viable and allowed countries to cut their dependence on imported liquefied natural gas. U.S. shale-gas output has risen to about a 10th of its total gas supplies, from 2 percent in 1990.
Sasol will pay C$262.5 million in cash for the transaction and fund 75 percent of Talisman’s portion of costs to develop Farrell Creek until the total purchase price is paid, it said.
Sasol and Talisman will cooperate on other, unspecified, gas opportunities in the region, according to the statement.