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South African Energy Firm Explores Cajun Country

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Petrochem giant Sasol plans to convert natural gas to liquid diesel in Louisiana, S&P gives Turkey some ratings love, and more in this week's look at CIVETS emerging economies.

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A South African energy and chemicals company is planning to invest $8 billion to $10 billion to build the first plant in the US to convert natural gas to diesel fuel.

Sasol Limited (SSL) has begun an 18-month feasibility study on a site in Calcasieu Parish, in southwestern Louisiana, according to news site AllAfrica.com.

A Zacks.com analyst wrote that the project "could be the start of a major movement to effectively substitute abundant, cheap natural gas produced with North America for expensive, imported crude oil." He noted the "chicken-and-egg" problem that has stymied the industry: Vehicles must be adapted to run on compressed natural gas, and they must have a place to fuel up.

The project would exploit the widening difference in cost between imported oil and shale gas reserves. Shale gas, which the US has in abundance, costs about one-fifth as much as oil to process for commercial use, according to the Financial Times.

The technology used by the company, called gas-to-liquids or GTL, converts natural gas into diesel and jet fuels. Sasol claims its gas-to-liquids technology produces fuel that burns cleaner than conventional diesel.

At a press conference with Louisiana Gov. Bobby Jindal, Sasol business development director Ernst Oberholster said his company's proprietary GTL technology "can help unlock the potential of Louisiana's clean and abundant natural gas resources and contribute to an affordable, reliable and high quality fuel supply for the United States."

In a statement, Gov. Jindal said the project would be "one of the largest industrial projects in Louisiana history." An estimated 850 permanent jobs would be created by the plant.

Sasol already operates two chemical plants near the proposed site, and owns the land on which it hopes to build the new plant.

The company last week reported earnings growth of 24.5% for the year ended June 30, mostly due to increasing fuel prices. It cited the strength of South Africa's rand currency as its biggest threat to growth in the year ahead.

CIVETS in Brief:

Banking Investors Look South
Money managers are fleeing US bank stocks, and at least some of them are taking their money to banking institutions in Colombia, Chile, and Peru, according to Barrons. Unlike their counterparts north of the border, South American banks are benefiting from their nations' strong growth, high demand for loans, and emerging middle-class populations.

Ed Kuczma, of Van Eck Global, picks Bancolombia (CIB), Banco Santander Chile (SAN), and Credicorp (BAP) of Peru.

Strike Slows Indonesian Copper And Gold Flow
A strike by at least 8,000 mine workers at Freeport-McMoRan Copper & Gold's (FCX) vast copper and gold mine on a remote Indonesian island has slowed production "significantly," the company's chief executive, Richard Adkerson, said in an interview on CNBC this week. He did not offer numbers, but an Indonesian government energy official said last week that the strike could reduce output at the mine by 230,000 tons of ore, worth about $19 million, per day.

Workers declared a month-long strike after failing to reach agreement with the company at the end of 38 days of negotiations on pay. They are demanding an increase in their wage range to between $17.50 and $43 per hour, from a current hourly rate of $1.50 to $3.

About 30% of mine workers reportedly are continuing to work at the mine, and a union representative said some non-union contractors also were at work there.

The mine in the remote Papua province, known as Grasberg, is the world's largest gold mine, and also holds the largest known reserves of recoverable copper.

GE Gets Power Deal In Egypt
General Electric (GE) and a partner company have won a $300 million contract to supply gas turbines for an expansion of two electricity-generating power plants in Egypt, the company announced.

The projects will increase the capacity of Egypt's power grid by 10%, most of it devoted to Cairo's electricity needs.

GE already has installed 70 gas turbines in Egypt that generate about a quarter of the nation's installed capacity. GE's partner in the project is the Chinese company Shandong Electric Power Construction Corp. III, or SEPCO III.

S&P Hikes Turkey's Credit Rating
Credit rating agency Standard & Poor's this week raised Turkey's local-currency sovereign credit rating to investment grade for the first time. The change raises the country's rating by two notches, to BBB-. The agency reaffirmed Turkey's foreign-currency sovereign rating at BB, two notches below investment grading, with a positive outlook.

Turkish government officials have long complained that the country's credit rating did not accurately reflect its strength compared to members of the eurozone to the west.

The benchmark Turkish stock index rose 5.1% for the day on the news, its biggest gain in a year. The Turkish lira gained 1% against the US dollar.
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