Sasol Form 20-F for the year ended 30 June 2021 - Book - Page 19
long durations. It requires us to commit significant
capital expenditure and allocate considerable
management resources in utilising our existing
experience and know-how.
lockdown of business and social activities in various
countries led to a sharp decline in demand for, among
others, fuel products which contributed to a further fall
in the global crude oil price. In South Africa, the
lockdown led to a destruction of the demand for fuels
and kerosene. The South African market is the most
important market for our fuel products which are a
large part of Sasol’s turnover. Therefore, we are
particularly vulnerable to a sharp decline in demand for
fuel products in South Africa and a decline of the crude
oil price.
Our large capital projects were and are subject
to the risk of delays and cost overruns inherent in any
large project, including as a result of:
Please refer to “Item 5.A—Operating Results”
for the impact of COVID-19 in the financial year ended
30 June 2021. The pandemic could have an increased
level of material adverse effect on our business,
operating results, cash flows and financial condition in
the current financial year.
Risks related to our capital investments
Our large projects are subject to schedule delays
and cost overruns, and we may face material
changes in market conditions or other business
assumptions, which could render our projects
unviable or less profitable than planned
The low-density polyethylene (LDPE) unit of
the LCCP achieved beneficial operations on 15
November 2020. The LDPE unit is the seventh and
final LCCP unit to come online. The LCCP is now
complete and total capital expenditure incurred is
within the previously communicated guidance of
US$12,8 billion.
In Mozambique, the Field Development Plan
Amendment (FDP) of the PSA was approved by the
Government of Mozambique (GoM) on 29 September
2020. The PSA development will allow for flexible
production from the different reservoirs with gas sales
to Central Termica de Temane (CTT) and Sasol South
Africa Limited (SSA), Oil/Condensate sales to the
international markets and LPG sales to Empresa
Nacional de Hidrocarbonetos (ENH). On 19 February
2021, the Sasol Board of Directors (the Board)
approved the Final Investment Decision (FID) with an
estimated project cost of US$760 million. The project
execution has been delinked from CTT financial close
and execution commenced in quarter three of calendar
2021. In addition, COVID-19 restrictions may have an
impact on the overall project schedule.
The development of these and similar projects
involves capital-intensive processes carried out over
18
•
shortages or unforeseen increases in the
cost of equipment, labour and raw
materials;
•
unforeseen design and engineering
problems, contributing to or causing late
additions and/or increases to scope;
•
unforeseen construction problems;
•
unforeseen failure of mechanical parts or
equipment;
•
unforeseen technical challenges on startup causing delays in beneficial operations
being achieved;
•
inadequate phasing of activities;
•
unforeseen process safety issues;
•
labour disputes;
•
inadequate workforce planning or
productivity of workforce;
•
inadequate change management practices;
•
natural disasters and adverse weather
conditions, including excessive winds,
higher-than-expected rainfall patterns,
tornadoes, cyclones and hurricanes or a
pandemic, such as COVID-19;
•
failure or delay of third-party service
providers; and
•
regulatory approvals and compliance
obligations, including changes to
regulations, such as environmental
regulations, and/or identification of
changes to project scope necessary to
ensure safety, process safety, and
environmental compliance.