C
hemicals and energy
group Sasol is preparing
to sell several assets,
including its Canadian shale gas
assets, following an overhaul
of its corporate strategy, which
eschews any further greenfield gas-
to-liquids (GTL) investments in
favour of smaller acquisitions and
projects of between $500-million
and $1-billion.
In future, the group’s growth
will be targeted towards oppor-
tunities in the areas of speciality
chemicals, Southern African fuel
retailing and gas and oil explora-
tion and production in Mozam-
bique and West Africa. Oil refin ing,
GTL, commodity chemicals and renewable
energy are no longer viewed as growth drivers.
Sasol will, however, seek to leverage renewable
energy to enable it to reduce emissions.
The JSE-listed group’s decision to
de-emphasise GTL marks a major departure
from its previous strategy of seeking to
internationalise the business on the back of
the advances it had made in using the Fischer–
Tropsch technology to convert coal and gas
into fuels and chemicals.
In fact, the acquisition of the Montney shale
gas acreage, in north-east British Columbia,
was strongly tied to the now abandoned plan to
build a $13-billion to $15-billion GTL facility
in Louisiana, in the US. Prior to that decision,
Sasol had also pulled back from several coal-to-liquid prospects in Asia and Africa.
The new strategy was unveiled last month to
investors by joint CEOs BonganiNqwababa
and Stephen Cornell, who also promised to
balance future growth with improved returns
and higher dividends.
Following a capital-intensive phase, which
has included the mega Lake Charles Chemicals
Project (LCCP) under way in Louisiana, in
the US, the new strategy sought to position
the company for a lower-for-longer oil-price
environment.
Sasol confirmed that the LCCP cost had
escalated by $130-million to $11.13-billion,
after the project site was rocked not only
by Hurricane Harvey, but also by Irma and
Nate – events not catered for among thecontingencies when the project’s capital cost
was revised from $8.9-billion to $11-billion in
Aug ust 2016.
While describing the LCCP as a “game
changer”, Cornell indicated that Sasol no
longer intended pursuing wholly owned com-
modity chemicals megaprojects, but would
rather leverage its megacomplexes in Southern
Africa and North America in the pursuit of
value-based growth prospects.
The new strategy also sought to
reward shareholders for their
“patience” during the expenditure
phase by stepping up dividend
returns from about 36% cur rently
to 40% by 2022 and 45% there-
after, and by improv ing the return
on invested capital to 12%.
The strategic rethink had been
coupled to a review of 100 assets
for classification as either core or
noncore.
The review was more than 50%
complete and Nqwababa reported
that some assets had already been
identified for either closure or
disposal. However, besides the
Canadian shale gas assets, he said
it was pre mature to disclose which
other assets had been identified
for sale.
However, given that Sasol had decided it
would no longer pursue refin ing, the review
could have impli ca tions for the Natref refinery,
in the Free State, which is a joint venture
with Total.
CFO Paul Victor said further announce-
ments would be made during the 2018 calendar
year, but stressed that by far the majority of
group assets would be retained, with inter-
ventions planned for those core assets that
were currently underperforming.
In parallel, Sasol had also identified several
acquisition targets that it would pursue follow-
ing the presentation of its new strategy to
investors.
The strategy had been stress-tested against
various oil-price scenarios, but was premised
on a base case of oil trading at $60/bl over
the period.
Crucially, the new corporate plan assumes
no decoupling of overall transport fuel demand
from global economic growth, despite the
entry of electric vehicles and the expectation
of further efficiency improvements to petrol
engines.
However, Sasol does foresee a sharp
fall-off in the demand for diesel, which
was a contributing factor to its decision to
de-emphasise the role of GTL in its strategy.
“Overall, we are making a strategic shift
from volume to value, while committing our-
selves to a more balanced approach in return-
ing value to shareholders through the cycle,”
Victor explained.Bukula felt at least part of the reason for
the current predicament facing Eskom and
the country lay with the Electricity Pricing
Policy of 2008.
The policy, he said, had been crafted
primarily to enable Eskom to recover all its
costs and to fund the building of 10 000 MW
of new capacity off its balance sheet.
However, it had paid far too little attention
to the consumer.
“This policy assumed an efficient and
prudent operator – something that Eskom has
proved not to be,” Bukula said, adding that
this lack of efficiency had given rise to the
death-spiral problem.Any future policy and legislation, Bukula
added, should improve choices for customers,
a move that would inevitably result in a far-
reaching restructuring of the electricity
supply industry, whereby Eskom would
be responsible for the “wires and system
operations”, but exited the business of selling
kilowatt hours.
All five panellists agreed that avoiding
the utility death spiral and managing the
energy transition would be all but impos-
sible without greater collaboration between
stake holders.
“Our circumstances and conditions have
changed, so our solutions should also change.
Policy cannot be static,” Nene concluded.10 ENGINEERING NEWS | December 8–14, 2017 RA
NEWS&INSIGHT
SASOLVolume to Value
Speciality chemicals now core as Sasol transitions
out of capex-heavy phaseSTRATEGIC SHIFT
Sasol joint CEOs Bongani Nqwababa and Stephen CornellTERENCE CREAMER | CREAMER MEDIA EDITORPicture by Senior Chief Photographer Duane Daws- From page 9