Johannesburg - Sasol has a competitor in the emerging US coal-to-liquids (CTL) industry that could beat the petrochemicals firm to building the first CTL plant in the US.

This week, US firm Rentech agreed with US coal mining group Peabody Energy to develop a CTL plant in Illinois.

Peabody will supply the CTL plant with close to 1 million tons of coal a year.

The firms claim the project could become the first commercial CTL facility in the US by 2010 at a cost of $1 billion (R7 billion).

Sasol is looking to a build a CTL plant in one of three US states as part of its global expansion programme. The three US states - Montana, Illinois and Wyoming - hold about 56 percent of total US coal reserves. Peabody and Rentech are also planning to build a CTL plant in Montana.

Sasol spokesperson Johann van Rheede said Thursday: "Sasol welcomes the growth of a global CTL industry."

Rentech expects the Illinois plant to produce 1 250 barrels of day, much less than Sasol's benchmark for an international CTL plant of 80 000 barrels a day. A Sasol CTL plant could cost between $5 billion and $7 billion to build.

In March, Sasol's chief executive, Pat Davies, said the US government incentives could benefit Sasol if Washington declared the projects strategic. The incentives could include loan guarantees, which would make it cheaper for Sasol to secure finance.

CTL is expensive technology and a CTL investor would be hard-pressed to make a return without major incentives.

The New York Times said a number of US congressmen were pushing for the government to subsidise CTL ventures in that country by offering loans and tax credits to firms developing CTL plants.

Van Rheede said that host government support for CTL ventures was essential as they required major investment.

However, the New York Times added that environmental groups were opposed to CTL, warning that CTL fuels would produce almost twice as much of the greenhouse gases as ordinary petrol.

Van Rheede said: "Work is in progress to advance technology that will reduce emissions and carbon capture is also an option. Sasol will not build any CTL facilities that do not conform to host country specifications or World Bank standards."

The incentives before US house and senate committees include: loan guarantees for six to 10 major CTL plants, with each likely to cost at least $3 billion; a tax credit of 51c for every gallon of coal-based fuel sold until 2020; automatic subsidies if oil prices drop below $40 a barrel; and permission for the US air force to sign 25-year contracts for almost a billion gallons a year of coal-based jet fuel.