Every day 120 000 metric tons of coal are transported to a plant at Secunda, near Johannesburg, where they are converted into 150 000 barrels of oil a day.
The plant belongs to one of South Africa's success stories, Sasol, the parastatal company that invented and perfected the technology for making petrol and diesel from coal.
Sasol's main plant in the province of Mpumalanga - the only commercial coal-to-liquid plant in the world - produces about 150 000 barrels of synthetic fuel a day and meets about 28% of South Africa's annual fuel needs.
Coal-to-liquid (CTL) technology makes economic sense only in a world of high oil prices: synthetic fuels become economically viable when oil prices reach $50 a barrel. As a result, Sasol has come of age. Until 2003, oil prices averaged $25 a barrel, making $45-a-barrel liquid coal economically prohibitive, but today oil prices hover at $70-a barrel, so the demand for CTL technology is booming.
Worldwide liquid-coal production is expected to rise from 150 000 barrels a day in 2007 to
600 000 in 2020 and 1.8 million barrels a day in 2030.
Nowadays - amid soaring oil prices and instability in the Middle East - the Sasol petrochemicals group is being courted by countries across the globe. Sasol usually charges a fee for licensing its technology, but concentrates on establishing a share ownership in the facilities once built - with the aim of ensuring a slice of the long-term profits.Sasol is now the world's biggest producer of synthetic fuel, having branched out to gas-to-liquid technology too. Its profitability has also been boosted by expanding its end products to include plastics, fertilizers and explosives. Its larger chemical portfolios include polymers and solvents, and their intermediates, waxes, phenolics and nitrogenous products.
The group also has a retail presence - selling liquid fuels and lubricants through a growing network of Sasol convenience stores and Exel service stations.
The CTL technology dates back to the 1920s, when two German chemists, Franz Fischer and Hans Tropsch, developed a process to convert coal into a gas and then used it to make synthetic fuels. During the Nazi reign, the "Fischer-Tropsch method" was employed in the war effort, as Germany lacked access to sufficient crude oil. International oil companies also experimented with the process, but put it aside because oil was cheaper.
Sasol - prompted by South Africa's apartheid-era isolation, as well as the poor quality of its coal- perfected this technology at its first plant in Sasolburg back in 1955. When oil prices soared in the 1970s, Sasol built two more plants in Secunda with a $6-billion government loan. The company was privatised and was listed on the Johannesburg Stock Exchange in 1979, but the government maintains a 23.5% stake.
This heavy subsidisation pattern continues, with this expensive technology requiring similar incentives and loan guarantees elsewhere - resulting in engineers shunning CTL for a long time. But with the world approaching energy peak, CTL technology is gaining favour.
Another benefit of CTL technology is that the engines of cars need no modification to use the product. In fact, Sasol's daily production supplies 30% of South Africa's transport-fuel needs. Fuel experts predict that liquefied coal will be providing much of the world with its transport fuel within the next 20 years.
For the past seven years, aircraft flying from OR Tambo International Airport have used a semi-synthetic blend of 50% jet fuel from coal produced at a Sasol CTL refinery and 50% derived from traditional crude oil. The US Air Force has intensified its focus on CTL with projects to substitute B52 jet fuel with coal-derived liquid fuels. The US is monitoring Sasol's innovations in this area.
CTL technology looks set to stay. The world has enough known oil reserves for just 41 years, but has 155 years' worth of coal reserves; the technology, therefore, looks set to enjoy further resuscitation elsewhere - regardless of its expense and environmental impact.
Liquefied coal emits twice as much carbon dioxide as burning oil, so countries looking to limit greenhouse gas emissions may have to find alternative carbon trading mechanisms to offset the damage caused by CTL technology. As a signatory to the Kyoto Protocol, South Africa is committed to curbing its carbon emissions, but since it is classified as a a "developing country" it has some leeway before having to institute these changes. CTL technology also emits large amounts of sulphur dioxide, leading environmentalists to lobby against it on behalf of neighbouring people who suffer respiratory problems.
However, CTL technology proponents have indicated that the technology can be improved. Newer plants capture carbon underground, as sequestration (separation) technology traps and buries the CO2 waste emissions, protecting the atmosphere from harm. With sequestration, powering a car with liquid coal is approximately 30% cleaner than using petrol.
CTL technology is particularly attractive in India because the country has significant coal resources and because 72% of its crude oil is imported. Sasol has shown interest in bringing its technology to India and is willing to invest about $6-billion in an Indian coal liquefaction project.
China, whose coal reserves are estimated at one trillion tons, is drawing on Sasol to turn this into liquefied coal. In the pipeline are about $25-billion worth of investments in liquid coal.
The Shenhua Group, China's largest coal producer, is in negotiations with Sasol to jointly build two CTL projects - each with a price tag of about $6-billion - that are expected to start in 2012. They will both use Sasol's Fischer-Tropsch technology, and Sasol is asking for a 50% equity stake in the projects.
The Sinopec Corporation is cooperating with Sasol to explore indirect CTL technology.
In the United States, CTL technology has made headlines recently as officials are pushing to subsidise coal as the king of alternative fuels.
Sasol had previously said that it had, in association with two large US energy companies, completed pre-feasibility studies into possible CTL plants in the country. These were undertaken after the passing of the US Energy Policy Act of 2005, which aims to combat growing energy problems.
The US Defence department is also considering CTL technology, as is the coal industry association, the National Coal Council, which is lobbying for government incentives to help generate some 2.6 million barrels of liquid fuel a day from coal by 2025. This would meet 10% of the country's energy demand.
Coal deposits in Montana, Illinois and Wyoming together account for some 267 billion tons - about 56% of total US reserves. Montana State is calling for CTL plants, and in Illinois and Kentucky, a bill has been introduced that offers loan guarantees and tax incentives for such plants.
In October 2006, the governor of Montana announced that the state would be building America's first eco-friendly CTL plant for $1.3 billion - and that Sasol would be brought on board because of its strong track record in the field.
In Pennsylvania, WMPI PTY LLC is working to develop the nation's first waste-coal to clean-fuels complex in the anthracite fields and hopes to break ground on the plant in 2007. The aim is to turn waste coal into zero-sulphur diesel fuel or jet fuel. The company is negotiating license agreements to use Sasol's Fischer-Tropsch process.
This experimental plant will cost over $300-million for 250 000 tons a year. This would make its capital costs per ton of oil more than ten times those of the Sasol-China plants.