Sasol buys stake in Talisman assets for $1 billion

By Agnieszka Flak

JOHANNESBURG (BestGrowthStock) – South African energy group Sasol (SOLJ.J: ) said on Monday it would pay $1.05 billion for a 50 percent stake in Canada’s Talisman Energy (TLM.TO: ) (TLM.N: ) Farrell Creek shale gas assets.

The deal is the petrochemical group’s first shale gas buy in a move to boost its gas portfolio and to provide feedstock for future gas-to-liquids plants based on its technology.

Sasol, which is also the world’s largest producer of motor fuel from coal, runs the world’s largest GTL plant in Qatar and is also building a GTL plant in Nigeria.

Sasol said the assets, which cover over 51,000 acres of land in the Montney basin of Canada’s British Columbia, had an estimated contingent resource of 9.6 trillion cubic feet (tcf).

The two firms have agreed to jointly conduct a feasibility study on the economic viability of a GTL plant in western Canada and to collaborate on other natural resource opportunities in the area.

“Strategically it seems sound,” said Mohamed Kharva, an analyst at Nedgroup, about the deal.

“There is some good potential and the GTL plant that they have been looking to do in North America could come to fruition over the next few years.”

Talisman now produces around 40 to 60 million standard cubic feet per day of gas from Farrell Creek, selling all of it to the North American market.

Shares in Sasol were up 1 percent at 334.82 rand by 0903 GMT, outperforming a 0.29 percent rise in Johannesburg’s Top-40 blue-chip index (.JTOPI: ).

SHALE GAS

Sasol said the C$1.05 billion ($1.05 billion) deal would be structured through an initial cash payment of C$262.5 million, with the remaining C$787.5 million to be paid out in future development costs.

Sasol said Talisman would continue to operate the Farrell Creek assets, associated gas gathering systems and processing facilities.

Shale gas — natural gas trapped in layered rock, rather than porous reservoirs — has revolutionized the U.S. gas market by offering an abundant new supply source, driving prices down.

The boom in shale natural gas drilling has raised hopes that countries would be able to rely on the cleaner fuel to meet future energy needs, but concerns about its impact on water quality could slow the industry’s ability to tap the resource.

Sasol expects to benefit from Talisman’s expertise to be able to advance its other shale gas venture in South Africa.

Sasol, together with Chesapeake Energy (CHK.N: ) and Statoil ASA (STL.OL: ), was given a permit earlier this year to conduct a one-year desktop study in South Africa’s Karoo basin to examine the prospects for shale gas.

Sasol had yet to prove if any gas could be found in the area, but if successful, shale gas could become an alternative to South Africa’s now largely coal-based power generation.

Sasol said it was advised by Morgan Stanley & Co (MS.N: ).

($1=6.810 rand)

($1=1.005 Canadian dollars)

(Additional reporting by Gugulakhe Lourie; Editing by Jon Loades-Carter)

Sasol buys stake in Talisman assets for $1 billion