Sasol Limited Integrated Report 2021 - Book - Page 52
Energy Business at a glance (CONTINUED)
Decarbonising the Energy Business,
while preserving value
• We experienced two work-related fatalities –
one before year end and the other after year end.
• Set up accredited vaccination sites at our
medical centres in Sasolburg and Secunda which
administered 4 743 vaccines by end of July.
• Higher production volumes at Secunda Operations
and Mozambique despite COVID-19.
We remain committed to preserving value for our stakeholders, acknowledging
climate change pressures and the need to decarbonise. Since 2017, we have been
working closely with several strategic partners, under the direction of the Board,
to develop an accelerated decarbonisation plan that is balanced across People,
Planet and Profit. Our revised sustainability plan aims to reduce emissions across
our South African Operations by 30%# by 2030 using transition gas, renewable
and plant efficiency as key levers.
• Fuel sales volumes up 3% due to stronger demand.
• Significant impairment of assets – R25bn –
due to stronger rand/US dollar outlook.
• R24 billion spent with Black-owned suppliers.
• Delivery against Mozambique local content plan.
Our commitment to safety and the reinforcement of our
high-severity incident (HSI) programme aimed at preventing
fatalities, HSIs and process safety incidents gained momentum.
Leadership and teams worked hard to embed our new safety
practices, rules and change behaviours. Regretfully, we
tragically lost two colleagues who passed away in word-related
incidents – one at Natref before year end and the other at
Mining after year end. Our recordable case rate (RCR) plateaued
at 0,26 from 0,27 in 2020. The fires, explosions and releases
severity rate (FER-SR) improved by 2% to 4,1 compared to 4,2.
EBIT increased by 20% to R6,7 billion compared to the prior
year. The gas value chain benefitted from higher external
gas sales in South Africa, the stronger closing rand/US dollar
exchange rate on translation of our Mozambique foreign
operations and lower depreciation on various assets classified
as held for sale. This was partially offset by a provision of
R1,4 billion for the potential retrospective application of the
final determination by NERSA of the maximum gas price.
Natural gas sales volumes in South Africa were 16%
higher than the prior year due to higher demand from
resellers and customers as COVID-19 restrictions were
eased. Methane rich gas sales volumes however were 5%
lower compared to the prior year due to operational issues
experienced by key customers.
Secunda Operational volumes of 7,6mt for FY21 were 3%
higher than the prior year with the benefit of the September
2020 phase shutdown which was replaced by 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.
Our productivity of 1 131 tons per continuous miner per
shift (t/cm/s) was lower than expected, which necessitated
more external coal purchases to meet demand from
Secunda Operations (SO). To improve productivity sustainably
going forward, we have implemented the Fulco integrated
shift system across all Secunda mines, with the last mine
rollout completed in June 2021, two months earlier than
planned. We expect our productivity to increase and
external purchases to decrease as we fully ramp-up the
Fulco integrated shift system.
The Fuels segment benefitted from stronger demand
as COVID-19 restrictions were eased. Demand for diesel
has recovered to above pre-COVID 19 levels, while petrol
demand remains between 90 – 95% of pre-COVID-19 levels.
Jet fuel demand continues to remain constrained. Liquid fuel
sales volumes of 54,2 million barrels were 3% higher than
the prior year.
EBIT increased by 17% for the year to R3,2 billion compared
to the prior year, mainly due to higher sales volumes, higher
export sales prices and lower external coal purchases, offset by
higher depreciation and an unfavourable stock movement.
Our normalised mining unit cost increased by 8% to R376/ton
due to higher labour, maintenance and depreciation costs,
partially negated by cash conservation measures.
In Mozambique, our gas operations were stable despite several
operational challenges due to COVID-19. Production volumes
of 114,5 bscf were 2% higher than the prior year. Our drilling
campaign was suspended due to COVID-19 restrictions and
started up on 7 August 2021.
We made strong progress in concluding our planned
divestments. The sale of Sasol’s 16 Air Separation
Units in Secunda was completed with Air Liquide taking
full operational control of the assets, effective from
24 June 2021. A long-term gas supply agreement (15 years)
will ensure the continuous supply of oxygen and other gases
to Sasol’s fuels and chemicals production units. We sold of
our interest in the Gabon oil producing asset during February
2021 and successfully completed the divestment of our
interest in the Canadian shale gas assets on 29 July 2021.
The divestment of our 30% equity interest in the Republic
of Mozambique Pipeline Investment Company (Pty) Ltd
(ROMPCO) is well underway for a consideration value of
approximate R4,2 billion. Sasol will retain a 20% equity
interest in the pipeline.
The Energy Business delivered a satisfactory performance.
The strong integrated value chain benefitted from higher
oil prices in the last quarter of the 2021 financial year,
and strict cost control and disciplined capital expenditure.
However, this performance was hampered by COVID-19,
inconsistent coal quality and plant instability.
Gaining momentum on asset
We recorded a LBIT of R18,2 billion compared to the prior year
of R11,6 billion. The LBIT for the financial year includes an
impairment of R24,5 billion relating to our Secunda liquid fuels
refinery cash generating unit, resulting mainly from a stronger
rand/US dollar exchange rate outlook and higher cost to produce
gas in the longer term.
Excluding remeasurement items, our profitability increased
more than 100% and gross margin increased from 31%
to 38% compared to the prior year, mainly due to higher
production at Secunda Operations and the benefit of
Natref procuring crude oil at much lower prices at the start
of the year.
ORYX GTL contributed R719 million to EBIT, improving by
more than 100% compared the prior year due to a solid
operational performance post the extended shutdown during
the first half of the financial year.
• Maintain safe and reliable operations.
• Deliver Sasol 2.0 to reset the resilience of our profitability.
• Deliver our differentiated retail loyalty programme and
improve convenience offerings.
• Deliver first green hydrogen in 24 months.
• Sign power purchase agreements for 600 MW of
renewables (jointly with Air Liquide) for delivery
• Leverage our FT technology, iconic brand, technical talent
and innovation muscle to lead the energy transition
in South Africa, building new capabilities through
partnerships, digitalisation and commercial excellence.
• Secure affordable gas supply and implement identified
renewable energy projects as well as pursue opportunities
in green hydrogen and Sustainable Aviation Fuel.
• Increasingly blend in sustainable carbon sources and
gas as feedstocks, while exploring offsets and keeping
a watchlist of options to reduce our carbon footprint,
including hydrogen blending as well as carbon capture,
utilisation and storage.
• Achieve Net Zero emissions by 2050.
• Address air quality management.
• Maintain flexibility and optionality of choices, allowing us
to quickly adapt the trajectory of our reductions and adopt
new technologies as they become economically attractive.
We will implement these incrementally such that we optimise capital
expenditure and manage the pace of execution. Our scenarios indicate that by
2030, we can achieve a ROIC that exceeds weighted average cost of capital
by at least two times. Key to this delivery is the successful implementation of
Sasol 2.0 transformation programme and the growth of our mobility business
through enhancing convenience offerings and targeting higher margin channels.
We are taking action to enhance our capabilities to win in this area and
supplementing our skills with external, globally experienced teams who have
done this before.
Pursuing renewables at scale
In the year we progressed work to secure large-scale renewable energy, with
plans to have 1200 MW by 2030. We signed an agreement with Air Liquide to
jointly procure 900 MW, issuing a request for proposals for the supply of an
initial 600 MW of renewable energy by 2023/24. We plan to pursue a further
300 MW before the end of 2022 for delivery by 2026/27.
Securing upstream gas
Gas is central to our plans. By securing affordable gas feedstock, we aim to
reduce our GHG footprint and supply sustainable lower-carbon products in
Southern Africa. As we expect supply from our PPA reserves to start declining
from 2025, we are investigating options to optimise our Mozambique upstream
assets and secure new gas supplies through importing liquefied natural gas.
In 2021, the Board approved FID on the development of the Mozambique
Production Sharing Agreement (PSA) licence area. The US$760 million project
will supply 546 bcf of gas to the CTT in Mozambique to enable a 450 MW gas
power plant; the supply of 30 000 t pa of LPG to the Mozambique Government;
production and export of 12 m bbl of oil and 292 bcf of gas to South Africa.
Pursuing technology advances
We are pursuing opportunities to take advantage of technology breakthroughs
to ensure we play a leading role in a green hydrogen economy in South
Africa. These include a partnership which will develop a proof-of-concept
demonstration for a green hydrogen mobility ecosystem. Together, we intend
to develop a mobility corridor and expand the demonstration to a pilot project
using one of South Africa’s main freight corridors, such as the N3 route between
Durban and Johannesburg, for hydrogen-powered heavy-duty long-haul trucks.
This partnership aims to build a sustainable end-to-end infrastructure for
Sasol Integrated Report 2021
Off 2017 base and excluding Natref.