SOUTH AFRICA’S FUTURE OIL FROM COAL EXTRACTION VITAL TO SELF-SUFFICIENCY

Press, Volume CVI, Issue 31089, 18 June 1966, Page 14

SOUTH AFRICA’S FUTURE OIL FROM COAL EXTRACTION VITAL TO SELF-SUFFICIENCY

(By the Johannesburg correspondent of the "financial Times > (Reprinted from the "Financial Times" bg arrangement.)

Though a small country by the standards of the world s industrial giants, South Africa is nevertheless the world leader in two fields ot technology. That the Republic is the world pioneer and leader in deeplevel mining is widely acknowledged; but its leadership in the difficult technique and practice of extracting oil-from-coal is by no means as well known. Yet South Africa possesses the world’s only petrol-from-coal project operating under normal commercial conditions at a profit This unique industrial complex is S.A.S.O.L.—South African Coal, Oil and Gas Corporation.

Despite an intensive—and currently intensified search for oil, South Africa has no indigenous oil resources. But it has cheap and abundant coal, plenty of water (in certain areas) and, naturally, no shortage of air. Before the Second World War, Germany was in the same boat—and it developed a costly oil-from-coal process that was the precursor of today’s 5.A.5.0.L.. But S.A.S.O.L. does not rely solely on the technique developed by the Germany of the 1930’5; it also uses the American Kellogg process, developed during the Second World War in case something drastic went wrong with world oil supplies. Further than this, however, S.A.S.O.L. itself has developed these two processes to peaks of efficiency undreamed of by their originators. Answer to Sanctions S.A.S.O.L. which currently produces about 10 per cent of the Republic’s petrol needs (and much else besides), is a vital factor in the country’s search for self-sufficiency and could be the decisive answer to sanctions on the Rhodesian pattern.

In its early days S.A.S.O.L. made one vast mistake. It relied on American and British technology; it did not bother with a pilot plant—lt went right ahead and put up a complete plant depending on advanced Western technology for returns and dividends. There was, even then, plenty of opposition. Imported oil was cheap and South Africa did not really need to make her own. And when, in 1957 the directors of S.A.S.O.L. made their brave decision to take over responsibility for the faulty American Kellogg Synthesiser from its United States builders, the cost of S.A.S.O.L. was up to £47m and it was still making losses. S.A.S.O.L. then developed its unwieldy and unresponsive plant in its own way and, by 1960 it declared its first profit—£67o,ooo, after depreciation of £l.4m from a turnover of £B.2m. The faith of S.A.S.O.L.’s pioneers was vindicated: South Africa could make petrol from its abundant coal. Cheap coal is the explanation of S.A.S.O.L.’s success. The corporation owns its own Sigma Colliery—and, in the early days, Sigma, perhaps the most highly mechanised colliery in the world, was supplying coal to the S.A.S.O.L. plant at less than 5s a ton. Even now, Sigma coal costs S.A.S.O.L. only 8s a ton. S.A.S.O.L. now, on its balance sheet to June, 1965, is

an £62.8 million enterprise. Its Sigma Colliery produced over 2.5 million tons of coal for gasification at a cost of little over 8s a ton; it sold products worth £ll7 million, of which £4.05 million were chemical products. Exports accounted for £1.25 million. It owns the township of Sasolburg which stands in its books at £3.6 million and houses 1523 families. It has contributed to £4.5 million to its half-owned associate South African Gas Distribution Corporation, which is now distributing the S.A.S.O.L. version of “natural gas" to the Reef. Petro-chemicals And it is the centre of South Africa’s booming coalbased petro-chemical industry. This complex now a major part of the Republic’s thriving secondary industry, supports fertiliser plants (Fisons and Windmill). Africa’s first synthetic rubber plant (Synthetic Rubber Company), a styrene based plasticiser plant, a polyethylene and pvc factory based on S.A.S.O.L. ethylene (owned by A. E. and C. 1.), and other elements of a petro-chemical industry based solidly on assured raw material supply at stable prices. Development in this direction, as a chemical raw material supplier rather than just a petrol-from-oil producer was one of the vital decisions taken by S.A.S.O.L.’s far-seeing pioneers in the difficult days of the 1950’5. This decision has paid enormous economic dividends to South Africa; but it has reduced the contribution that S.A.S.O.L. might have made towards the Republic’s freedom from independence on Imported oil. Had S.A.S.O.L. merely expanded its capacity as a petrol-from-oil producer, it could, by now, have been producing nearer to 20 per cent than its actual 10 per cent of the nation’s petrol requirements. In its early days S.A.S-.O.L.’s petrol was suspect. It required an Ordinance that all oil importers—international companies trading in South Africa —should sell 10 per cent of “indigenous oil products” to get sales of S.A.S.O.L.’s “Highveld” petrol off the ground. Nowdays, there is no difficulty—S.A.S.O.L.’s image as a petrol producer is bright, and local motorists are only too keen to call at the blue S.A.S.O.L. pump (which is a feature of most garages, whoever owns them, thanks to the 10 per cent requirements) and fill up with a genuine quality petrol which happens to enjoy a 4 cent (nearly sd) a gallon duty advantage. This concession, the only Government support enjoyed by S.A.S.O.L. gives S.A.S.O.L.’s locally produced petrol a marginal price advantage (less than i cent a gallon on the Reef) as compared with foreign petrols imported and transported from the coast. S.A.S.O.L. however, has expanded more as a petrochemical raw materials producer than simply as a Gov-ernment-supported petrol producer. This is simply a function of economics; and not siege economics, at that. Now, however, with Rhodesia’s example as a text, South Africa is becoming increasingly concerned with siege economics. In his triumphant post-election speech, Prime Minister Dr. Verwoerd spoke of the imminent commencement of a “second 5.A.5.0.L.” This with experience dearly bought by the first S.A.S.O.L. would be an economic and efficient producer of petrol

and other necessary oils. It would not be designed to produce the petro-chemicals made by S.A.S.O.L. which are sufficient—possibly even overabundant—for the industries based on them in the Republic. The “second 5.A.5.0.L.,” when it is built, will be established near abundant coal and plentiful water. At least three sites suggest themselves. It will, when it comes —probably within the next year—boost the Republic's supplies of "indigenous” petrol and other oil derivatives to at least 30 per cent of normal self-sufficiency. This is a level which, given the Republic’s present requirement of only 30 per cent oil in its energy pattern (cheap coal and its consequent cheap electricity make the country far less vulnerable to oil sanctions than many African Powers would like), means that South Africa, with its “second 5.A.5.0.L.” could be almost insulated from outside action as far as its fuel supplies are concenrned. So, it is reasonable to ask, why has the Republic not yet embarked on the "second 5.A.5.0.L.” venture that its dearly-bought technology so well fits itself for? The answer probably lies in the vastly stepped-up search for indigenous oil. If, against all the pundits, the present £5O million search for oil pays off, then there is little point in proving to the world (once again) that South Africa really does know all there is to know about making oil-from-coal.