Sasol Limited Integrated Report 2021 - Book - Page 19
Our operating context (CONTINUED)
THE PAST YEAR
Excess capacity and high inventories kept refinery margins under pressure. For individual products, petrol
margins started to recover during the year as global stocks returned to normal levels on improved mobility
as vaccine rollouts in the United States, the United Kingdom and Europe progressed. Despite coming down,
distillate stocks remained higher than usual as refinery runs to support increasing petrol demand exacerbated
diesel oversupply, while air travel remains restricted.
Driving patterns shifted from conventional peak traffic hours to a flatter distribution across the day due to
work from home policies. The South African refinery landscape continues to evolve with the announcement
by Engen that it would convert its refinery into an import terminal. This puts South Africa into a bigger net
importer environment. New entrants into the market are beginning to experiment with mobile fuel delivery
and sales to tap into customer needs for convenience. In all channels digitalisation continues to play a key
role to improve the customer value proposition.
Refinery margins will track global liquid fuels
demand recovery, which face risks as the
persistence of the COVID-19 pandemic is met with
an uneven return to personal mobility. Demand
recovery remains under threat from the rise of
COVID-19 variants, particularly in countries where
vaccinations have lagged or stalled. Ample product
stocks and more refining capacity than needed
to cover demand will limit margin improvement
during FY22 as new capacity additions outpace
THE PAST YEAR
Sasol continues to come under pressure to address
our emissions profile. We have also been responding
to a need to enhance our adaptation response, and
increase the physical resilience of our communities,
employees and facilities to the impact of a changing
climate. This has been amid numerous severe weather
events globally as well, as the release of the latest
science relating to climate change.
With our largest emissions originating in a developing
country, it is essential that we transition in a just
manner. Stakeholder expectations are factored into
our response from our diverse stakeholder grouping.
As a result, we aim to balance these requirements
and contribute positively to them.
On 31 August 2021, the Clean Fuels II Regulations were gazetted with an implementation date of
1 September 2023. In terms of the new Regulations, fuels that do not comply with the Clean Fuels II (CF II)
prescribed specifications may not be sold or produced for domestic consumption. Sasol, together with
industry bodies, have been engaging with the Department of Mineral Resourses and Energy (DMRE) as
we firmly believe that the country will require five years to be fully compliant with the CF II specifications.
Our implementation of the Clean Fuels II solution in Secunda is progressing and well on track to deliver
on-specification product in calendar year 2025. A decision on the future of the Natref refinery is still pending.
This past year, we saw the South African government
approve the establishment of a Presidential Climate
Commission to coordinate the country’s just transition.
It also increased the national target for higher emission
reductions by 2030.
HOW WE RESPONDED/WERE IMPACTED
HOW WE RESPONDED/WERE IMPACTED
Our integrated value chain benefitted from higher oil prices in the last quarter of the financial year, strict cost
control and disciplined capital expenditure. This performance was however masked by the COVID-19 impact
on demand, coal quality and minor plant instabilities. At Secunda Synfuels Operations we benefitted from
the postponement of the September 2020 phase shutdown which was replaced with a ‘pitstop’ shutdown
in May 2020. However, the increase in volumes was partly offset by some operational challenges. At Natref,
together with our partner, we reduced our run rates to respond to lower market demand.
We tripled our original scope 1 and 2 emissions
reduction target to 30% (off a 2017 base and
excluding Natref) across our Energy and International
Chemicals Business*, and committed to an ambition
of Net Zero by 2050, supported by roadmaps that
have built-in flexibility and optionality. We also
included a target to achieve a 20% reduction
in scope 3: Category 11 emissions for our
Energy Business by 2030.
Liquid fuel sales volumes were 3% higher than the prior year due to a strong recovery in demand and the
easing of lockdown restrictions. We continue to strategically target margin maximisation by placing our
products in the highest yielding channels and opened 10 new retail convenience centres. The outlook on
sales volumes is expected to be slightly depressed as a result of the third COVID-19 wave and unrests in
certain parts of South Africa.
In the past year Sasol refreshed its mobility strategy in order to respond to customer needs and strengthen
value propositions. At the same time, Sasol’s wholesale value proposition was strengthened to improve
reliability of supply. Additional import infrastructure could accelerate a market conversion to cleaner fuels,
potentially resulting in unsaleable Sasol product as there is limited market demand.
THE PAST YEAR
Chemical prices continued to strengthen into 2021 due to a combination of improved demand, higher oil
prices, reduced market supply due to the weather-related events in the United States and global supply chain
challenges due to the COVID-19 pandemic.
Our chemical market customers are setting more ambitious commitments and accelerating efforts to address
climate change and other key sustainability imperatives within the chemicals industry. COVID-19 has led
to changes in consumer cleaning habits as well as increased the demand for health and wellness related
products. Increased packaging demand driven by both health concerns and higher levels of e-commerce were
also notable. Global momentum behind the energy transition is growing and is expected to lead to changing
needs in the automotive sector and many other chemical markets.
We are positioning ourselves to lead the energy
transition in South Africa and have developed
pathways to decarbonise our existing operations
in a just transition way by creating shared value.
We have partnered with the IDC to commercialise
hydrogen and contribute positively to jobs and
Chemical demand remains strongly linked to
improvements in the global economy and aligned
with evolving mega-trends including changes
to the way we work and live in a post COVID-19
world. With the expectation of rising oil prices in
FY22 and financial year 2023, chemical prices are
expected to follow, albeit with a lag. Commodity
chemicals prices will also be impacted by changes
in supply and demand with the expectation
of over-supply in the next 18 to 24 months as
new capacity come online, particularly in China.
This supply is expected to be balanced with
demand in the next three to five years.
For the Energy Business, we are on the pathway
to procure 1 200 MW of renewable electricity by
2030 of which 900 MW is with Air Liquide. Further,
we have partnered with the LEN** consortium to
bid in concept for the production of SAF. We are also
looking at opportunities to incubate new low-carbon
businesses using our FT technology in our quest to
transform our Company into a sustainable enterprise.
We committed to 100% purchased renewable
electricity by 2026 for the International
HOW WE RESPONDED/WERE IMPACTED
The total chemicals external sales revenue was 11% higher compared to the prior year with the average
sales basket price increasing by 17% compared to the prior year. The higher prices were due to a combination
of factors. Despite adverse weather events in both the United States and South Africa impacting production,
the previously reported divesture of US Base Chemical assets in Q2 FY21 and the continued impact of
the COVID-19 pandemic, the total chemical sales volumes were only 3% lower compared to the prior year.
We hedged four million barrels of our ethane exposure for FY22 at an average swap level of US$c23,18/gal.
We continue to execute on the balance of the ethane hedging programme as ethane prices fall within
We rose to the challenge to meet the significant demand for Sasol solvents in sanitisers to support
efforts to combat the spread of COVID-19. The utilisation of appropriate biomass, circular feedstocks
and carbon dioxide utilisation chemistry are all being explored to support net reductions in GHG emissions
and growing concerns regarding resource scarcity.
This decade is critical year for tackling climate change.
Countries are committing to higher carbon reductions.
It is estimated by the United Nations that 110
countries have set a net zero target by 2050. Together,
they represent more than 65% of global emissions and
70% of the world economy.
COP 26 will take place in November 2021 and is
aiming for a deal on higher ambition, supported by
financing. Through national policy, businesses have
a responsibility to support the global effort and
demonstrate how their activities and investments are
taking the necessary steps to reduce emissions.
Sasol Integrated Report 2021
Excluding South African Chemicals Operations.
Linde PLC, ENERTRAG AG and Navitas Holdings (Pty) Ltd.