DECEMBER 20, 2010, 5:01 A.M. ET.

Sasol to Invest $1 Billion in Canadian Shale Gas

By ROBB M. STEWART And DAVID WINNING

JOHANNESBURG—Sasol Ltd., the world's largest producer of motor fuels from coal, said Monday it's buying half of Talisman Energy Inc.'s Farrell Creek shale-gas assets in British Columbia for 1.05 billion Canadian dollars ($1.04 billion), significantly boosting its natural gas resources.

It's the latest in a string of deals involving foreign companies targeting North America's unconventional energy resources. Talisman will retain the remaining 50% and will continue to operate the Farrell Creek assets, which cover more than 51,000 acres of land and an estimated resource of 9.6 trillion cubic feet of gas equivalent, or 22% of Talisman's resource potential in the area.

"The acquisition of this high quality natural-gas asset will accelerate our upstream growth while also potentially advancing Sasol's already strong GTL [gas-to-liquid] value proposition," said Pat Davies, chief executive of the Johannesburg-based petrochemicals company.

The companies have also agreed to conduct a feasibility study around the economic viability of a facility in western Canada to convert natural gas to liquid fuels using Sasol's GTL technology. It said this could provide an alternative to traditional North American pipeline or liquid natural gas marketing. The companies will collaborate on other western Canadian natural gas opportunities, Sasol said.

Sasol will pay around C$260 million in cash once the deal closes, and then fund 75% of Talisman's future capital commitments in the Farrell Creek area to a total of $790 million. The deal is conditional on approvals from regulators and the South African Reserve Bank.

"This is a strategic move towards unlocking some of the value of our Montney assets for us and our new partner, consistent with the strategy of derisking and developing Talisman's very large shale opportunities in the region," said John Manzoni, president & CEO of Talisman.

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