Sasol’s tricky balancing act

Sasol plans to run its flagship plant at full capacity, offsetting the use of coal feedstock by sourcing more renewables as part of a strategy by the world’s top producer of synthetic fuel from coal to improve its business.

South Africa’s second-biggest emitter of greenhouse gases will aim to ramp up the Secunda synthetic-fuels facility as close to a nameplate capacity of 7.6 million tons a year as possible, while maintaining its target of reducing emissions by 30% by 2030.

“We have to decarbonise — we will — but we’ll never decarbonise by shutting down,” Sasol CEO Simon Baloyi said in an interview on the company’s Capital Markets Day strategy. Instead, it will expand a renewable-energy target by about two-thirds to 2,000 megawatts. 

“We need to work on offsets so that we can keep the fossil fuel part running as long as possible,” he said.

Sasol’s first so-called CMD plan in four years comes during a turbulent oil market, which correlates with its fuel business, and US President Donald Trump’s irregular tariff oscillations that affect supply chains.

The stock has slumped for the past year, with investors eager for details on a future strategy.

As the company focuses on improving coal quality to ramp up Secunda and cutting costs, it’s working on improving the chemical arm to earn as much as $1 billion annually, more than three times its current contribution to the group in the next five years, said Baloyi. 

“We spent $12 billion on our international chemical business, and we have to make sure we turn around that business,” he told reporters. Sasol spent $12.8 billion on the Lake Charles chemicals facility in Louisiana.

Sasol has put in place protections from ongoing volatility in crude and foreign-exchange markets. For this year, it has completed an oil-hedging program that set the floor at around $60 a barrel, which is around the break-even price, and it has covered most volumes for the next, according to Sasol Chief Financial Officer Walt Bruns. 

The company is also lowering the net-debt level needed to trigger a dividend to $3 billion in fiscal 2027 from $4 billion, he said. It exceeded this in 2024, resulting in it skipping a final payout.

Sasol initially estimated that its emissions-reduction roadmap to reach the 30% cut would cost as much as R25 billion. It’s trimmed to R7 billion because it’s opted not to supply Secunda with liquefied natural gas to displace coal.  

Baloyi said some of the preliminary agreements that Sasol has announced over the last year or so — including a sustainable aviation business with Topsoe, a partnership with South African state-owned power utility Eskom on gas aggregation, and a clean-energy platform with Discovery Green — are signs of a longer-term move to a lower-carbon-energy business. 

“You won’t see us bringing gas to use our own facility, but gas-to-power we’ll probably do; we will do renewables” along with sustainable aviation fuel, the CEO said. “Naturally, we will slowly start to move away from fossil fuel.”