Enron Leaves Sweetwater With Sour Taste


Already facing a tall task to finance its Sweetwater gas-to-liquids plant, Syntroleum Corp. has suffered another setback in the loss of bankrupt energy giant Enron as an equity investor.

A Syntroleum official said recently that Enron had previously announced it would not fulfill its commitment to take a 13 percent stake in the project. Syntroleum is now looking for an alternative partner to invest in the plant, which would be the first commercial producer of gas-to-liquids base oils and other specialty products.

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What that means is that we are looking for an alternative equity partner, Syntroleum spokesman John Ford said Tuesday. We are in discussions with a couple other interested parties. As we’ve said before, this is a difficult time to look for financing.

Except for financing, Syntroleum, of Tulsa, Okla., has secured all major permits and contracts needed to build Sweetwater, which it plans to construct on Australia’s Burrup Peninsula for more than $600 million. Enron announced in June 2000 that it would pay $21 million for a 13 percent interest in the project.

But that was before Enrons financial problems came to light. The Houston-based company informed Syntroleum even before its bankruptcy filing that it would not participate in the project. A Syntroleum officer disclosed the setback in response to a question during a conference call with investors Jan. 30.

Syntroleum had lined up a second equity partner – Ivanhoe Energy – which also planned to take a 13-percent stake. In November, however, Ivanhoe said it might not participate, citing delays and rising costs of the project.

Syntroleum planned to pay for the balance of the project through its own investment and by borrowing. Officials have been meeting with lenders for months but say they cannot predict when they will secure funding because financial markets have tightened.

Proponents say gas-to-liquids base oils will have performance characteristics comparable to Group III mineral base oils and polyalphaolefins and price advantages over both. The Sweetwater plant would have daily capacity to produce 11,500 barrels of specialty products, half of it base oils.

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