Sasol Form 20-F for the year ended 30 June 2021 - Book - Page 77
Long-term provisions, refer “Item 18—
Financial Statements—Note 33
Long-term provisions”;
Post-retirement benefit obligations, refer
“Item 18—Financial Statements—
Note 35 Post-retirement benefit
obligations”;
Useful economic lives of assets and
depreciation of coal mining assets,
“Item 18—Financial Statements—
Note 20 Property, plant and equipment”;
Recognition of deferred tax assets and
utilisation of tax losses, refer “Item 18—
Financial Statements—Note 15 Deferred
tax and Note 13 Taxation”; and
Determination of whether an arrangement
contains a lease, incorporating optional
lease periods and determining the
incremental borrowing rate in accordance
with IFRS 16 Leases, refer “Item 18—
Financial Statements—Note 18 Leases”.
Our reported natural oil and gas reserves are
estimated quantities based on SEC reporting
regulations. Additionally, we require that the estimated
quantities of oil and gas and related substances to be
produced by a project be sanctioned by all internal and
external parties to the extent necessary for the project to
enter the execution phase and sufficient to allow the
resultant products to be brought to market. See
“Item 4.D—Property, plants and equipment”.
There are numerous uncertainties inherent in
estimating quantities of reserves and in projecting
future rates of production, including factors which are
beyond our control. The accuracy of any reserve
estimate is a function of the quality of available data,
engineering and geological interpretation and
judgement. Estimates of oil and gas reserves therefore
are subject to future revision, upward or downward,
resulting from new data and current interpretation, as
well as a result of improved recovery, extensions and
discoveries, the purchase or sale of assets, and
production. Accordingly, financial and accounting
measures (such as the standardised measure of future
discounted cash flows, depreciation and amortisation
charges and environmental and decommissioning
obligations) that are based on proved reserves are also
subject to revision and change.
Estimation of natural oil and gas reserves
Refer to “Table 5—Standardised measure of
discounted future net cash flows relating to proved
reserves”, on page G-6 for our standardised discounted
future net cash flow information in respect of proved
reserves for the year ended 30 June 2021 and to “Table
6—Changes in the standardised measure of discounted
net cash flows”, on page G-7.
In accordance with the SEC regulations,
proved oil and gas reserves are those quantities of oil
and gas which, by analysis of geoscience and
engineering data, can be estimated with reasonable
certainty to be economically producible—from a given
date forward, from known reservoirs under existing
economic conditions, operating methods, and
government regulations—prior to the time at which
contracts providing the right to operate expire, unless
evidence indicates that renewal is reasonably certain,
regardless of whether deterministic or probabilistic
methods are used for the estimation. The project to
extract hydrocarbons must be approved and must have
commenced or the operator must be reasonably certain
that it will commence the project within a reasonable
time. Existing economic conditions define prices and
costs at which economic producibility is to be
determined. The price is the average sales price during
the 12-month period prior to the reporting date
(30 June), determined as an un-weighted arithmetic
average of the first-day-of-the-month price for
each month within such period, unless prices are
defined by contractual arrangements. Future price
changes are limited to those provided by contractual
arrangements in existence at year-end.
Depreciation of natural oil and gas assets
Depreciation of mineral assets on producing
oil and gas properties and property acquisition costs is
based on the units-of-production method. Apart from
acquisition costs, which are depreciated using estimated
proved reserves, mineral assets are depreciated using
estimated proved developed reserves.
Fair value estimations of financial instruments
We base fair values of financial instruments on
quoted market prices of identical instruments, where
available. If quoted market prices are not available, fair
value is determined based on other relevant factors,
including dealers’ price quotations and price quotations
for similar instruments traded in different markets. Fair
value for certain derivatives is based on pricing models
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