How sanctions worked for South Africa's Sasol

From an Arab oil embargo to coal gasification mastery

Published July 11, 2006 9:07PM (EDT)

In the annals of energy history, 1973 is notorious for the Arab oil embargo against the U.S. and Western Europe. A little less well known is the tidbit that about a month after the Arab states embargoed oil exports to the U.S., South Africa was added to the list, as punishment for its apartheid policies. In 1974, after the embargo was lifted against the U.S. and Europe, South Africa remained on the blacklist. Iran, which did not participate in the original embargo, served as South Africa's primary source of oil for a few years. But after the overthrow of the Shah in 1979, Iran also stopped exporting oil to South Africa.

Why is this relevant? Because it explains why a South African petrochemical company, Sasol, is making huge waves in the international energy scene this year, signing deals left and right to set up refineries that convert coal or natural gas into liquid fuel. Today the company announced it was exploring the possibility of a coal to liquids plant in India. Three weeks ago it announced it was moving to the second stage of feasibility studies for two plants in China. A natural gas to diesel fuel plant is already up and running in Qatar. Even the U.S. is getting into the act -- Montana's high-on-coal governor, Brian Schweitzer, is reportedly interested in Sasol's technology.

History can get pretty twisted. If international sanctions aimed at punishing a heinous regime hadn't forced Sasol to perfect its technology for converting coal and natural gas into fuel, the company wouldn't be where it is today, sitting pretty with skills that become more attractive with every bump upward in oil prices.

The story really begins in the 1920s, when two German scientists, Franz Fischer and Hans Tropsch, devised a technique for converting coal into gas and then into liquid fuel. In 1938 Fischer visited South Africa and helped local industrialists master the Fischer-Tropsch process. During World War II, the Nazis used the technology to keep their war machine running on "synthetic fuels," but after the war, the relatively expensive process lost favor, unable to compete with cheap oil.

Then came the sanctions against South Africa. With no domestic source of oil, South Africa was forced to innovate. Today, Sasol supplies 28 percent of South Africa's fuel needs from its coal and gas conversion technologies.

Contradictions abound. Qatar was one of the Arab states that embargoed exports to South Africa. Today, Qatar plans to employ Sasol technology to make it the world's center for natural-gas-to-liquid-fuel production. Or even better: Max Sisulu, an African National Congress revolutionary who at one point in the 1970s was instrumental in procuring rockets that were fired at Sasol facilities, now serves as a Group GM in the company, working to expand black participation at every level of the company.

You can't exactly call the rise of Sasol an example of successful industrial policy. South Africa's government would never have chosen to fund an expensive, complex technology if it had been able to maintain access to imported oil. The former prime minister of South Africa, P.W. Botha, was known to complain that oil sanctions against South Africa cost the nation some 22 billion rand between 1973 and 1984. "Just think what we could have done if we had that R22 billion today?" he lamented. But there's a lesson buried in here somewhere. Sometimes long-term advantage accrues from doing things that don't make short-term sense. Left to its own devices, a "free market" wouldn't have gotten around to polishing up Fischer-Tropf technology on a commercial scale until it was forced to.

One wonders, what other technologies could we have in place now, ready and waiting to alleviate an upcoming oil crunch and the pressures of climate change, if governments had forced the issue decades ago?

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

MORE FROM Andrew Leonard

Related Topics ------------------------------------------

Globalization How The World Works