Sasol Form 20-F for the year ended 30 June 2021 - Book - Page 40
future rates of production, including factors that are
beyond our control. The accuracy of any reserve
estimate is a function of the quality of available data,
engineering and geological interpretation, costs to
develop and produce, and market prices for related
products.
industry profitability (generally driven by high
utilisation rates) tend to alternate with times of low
profitability (generally characterised by low utilisation
rates), amplified by subsequent periods of over- and
under-investment in new capacity. Long construction
lead times result in waves of capacity additions toward
the end of the high-margin expansionary phase, thus
exacerbating the already weakening market conditions.
The ensuing cyclical downturn and low profitability
tends to rein in capital spending, leading to an extended
period of very slow capacity growth that generally
coincides with rapid demand growth during the
economic recovery phase. This situation, in turn, tends
to create tight market conditions and improved margins.
Reserve estimates are adjusted to reflect
improved recovery and extensions, and also revised
from time to time based on improved data acquired
from actual production experience and other factors. In
addition, regulatory changes and market prices may
result in a revision to estimated reserves. Revised
estimates may have a material adverse effect on our
business, operating results, cash flows and financial
condition. See “Item 4.D—Property, plants and
equipment”.
Currently, the global spread of the COVID-19
pandemic has caused significant volatility impacting
chemicals demand, supply and the global supply chains
that serve them. This has translated into both
opportunities and risks for Sasol as the organisation’s
global presence and diversified product portfolio allow
it to manage the volatility that may arise in a specific
market. Demand risks to the chemicals outlook include
an uncertain but somewhat more optimistic global
economic growth outlook, US/China trade relations,
geopolitical tensions, and business and consumer
confidence trends. Supply is currently largely affected
by the capacity overbuild taking place in the US and
China mainly in the ethylene and propylene value
chains. COVID-19-related supply chain disruption
could impact our ability to reach global markets from
South Africa or other producing regions and could also
restrict access to specific markets. Consequently,
forecasting the timing of the industry business cycle,
and prices for chemical products during the current
volatility remains difficult and a deterioration in overall
conditions may have a material adverse effect on our
business, operating results, cash flows and financial
condition.
We may be unable to access, discover, appraise and
develop new coal, synthetic oil, natural oil and
natural gas resources at a rate and price that is
adequate to sustain our business and/or enable
growth
Competition for suitable opportunities,
increasing technical difficulty, stringent regulatory and
environmental standards, large capital requirements and
existing capital commitments may negatively affect our
ability to access, discover, appraise and develop new
resources in a timely manner, which could adversely
impact our ability to support and sustain our current
business operations.
Our natural gas reserves in Mozambique are of
particular importance as feedstock for our plants in
South Africa, as well as for sales of gas into the market
in South Africa. There is currently a lack of alternative
sources of natural gas in southern Mozambique with
similar volumes and at affordable development and
production costs. Although alternative sources of gas
supply in southern Africa are being considered, there is
a risk that these resources may not be secured at a price
adequate to sustain our business and/or enable growth.
Our coal, synthetic oil, natural oil and natural gas
reserve estimates may be materially different from
quantities that we eventually recover or ultimately
make use of
Our future growth could also be impacted by
these factors, potentially leading to a material adverse
effect on our business, operating results, cash flows and
financial condition.
Our reported coal, synthetic oil, natural oil and
gas reserves are estimated quantities based on
applicable reporting regulations that, under present
conditions, have the potential to be economically
mined, processed, produced, delivered to market and
sold.
There are numerous uncertainties inherent in
estimating quantities of reserves and in projecting
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