Sasol’s oil future at risk

Oil and chemicals giant Sasol has warned investors that the outlook for its petroleum business is deteriorating as global transport is shifting towards more fuel-efficient vehicles and electric alternatives. 

Sasol issued this warning in its annual report published last week, where the company noted that demand for petrol remains weak in South Africa. 

The Presidential Climate Commission’s theoretical modelling indicates that South Africa will need about 750,000 fully electric vehicles by 2030 to meet the country’s net-zero emissions targets. 

“The outlook for petrol is not encouraging as sales of smaller and more fuel-efficient cars are likely to continue, exacerbated by hybrid and electric vehicles in the latter part of the decade,” Sasol said. 

“A significant part of our product slate is petrol. We are assessing various technological options to mitigate the risk of an oversupply of petrol to South Africa.”

Sasol has come under pressure from authorities and investors to reduce its emissions.

Financial services group Old Mutual raised concern this year about what it sees as a lack of clarity from Sasol on its strategy to reduce its carbon emissions, which are second only to Eskom’s.

Sasol is the single biggest private emitter of carbon emissions in South Africa.

“We feel the company has failed to communicate a clear strategy that would resolve or improve its current climate metrics and carbon emissions,” Old Mutual said in its annual report.

The group recently impaired about R35 billion in its Secunda liquid fuels plant in Mpumalanga, which attracted the attention of authorities for its high emissions.

The potential loss of its appeal over sulfur dioxide isn’t factored into the writedown that it took on Secunda.

Sasol CEO Fleetwood Grobler told Bloomberg that the company is “confident that we will get it over the line” and win the case.

“But if the license is revoked because of that, I believe that is a severe impact and then a phased shutdown will be the result.”

Sasol is also facing a complaint for alleged excessive pricing of natural gas it produces from fields in Mozambique and transports to its own operations and private customers in South Africa by pipeline.

The Competition Commission in July referred the claim against the company’s gas unit to the Competition Tribunal for prosecution.

“Sasol Gas is evaluating and considering the referral by the commission, and Sasol Gas will in due course respond as appropriate,” the company said in an emailed response to questions on Monday. 

“These matters have formed part of ongoing business for Sasol,” it said of the multiple suits. “We operate in a highly regulated industry across our value chain, and the legal processes underway are a reflection of our business activity in this environment.”