Sasol Refocuses, Exits Shale and GTL
Following an evaluation of its portfolio, South African energy and chemical company Sasol has decided to focus on high-value specialty chemicals and withdraw from shale gas and gas-to-liquids projects.
“Our existing application know-how and strong product portfolio in a broad range of specialty chemical products, gives us confidence we can deliver in this area,” said Stephen Cornell, Sasol’s joint president and CEO. “Our push into specialty chemicals is further supported by the benefit of the scale and cost advantage we enjoy through our investments in commodity chemicals in South Africa and North America. We will take full advantage of these large, cost-competitive facilities to grow our specialty chemicals portfolio.”
Chief financial officer, Paul Victor, added that the company is looking to invest between $500 million and $1 billion beyond 2022 on small- to medium-sized organic and inorganic opportunities in specialty chemicals, as well as exploration and production and retail fuels.
The refocusing decision was taken as Sasol completed reviews on more than half of its global assets. While confirming that it will retain the majority, while also defining clear improvement actions, the company said it has identified its shale gas assets in Montney Basin, Canada, as non-core and plans to start a structured sale process involving its partner Progress Energy.
Sasol said also it will no longer invest in greenfield gas-to-liquid (GTL) projects, including one proposed in Louisiana, USA, as these have become unattractive on both economic and environmental grounds.
The South African energy giant has been delaying a formal decision on its GTL plans for the US since January 2015, following the downtrend in oil prices, which were around $94/bbl when the project was first announced in 2012. The company said its current assets are generating good returns and cash flows, but the value proposition to build new projects is uneconomical against a volatile and low oil price environment.
Shell also abandoned plans for a GTL plant in Louisiana in December 2013, after costs surged from an initial estimate of $12.5 billion to $20 billion.
Cornell said Sasol will continue to work on opportunities to optimize and improve its existing facilities in regard to catalyst performance, product yields and energy efficiency. “We also see further opportunities to high-grade the value from our GTL molecules through base oils extraction, and we will continue to license and support our Fischer-Tropsch technology,” he said.
Sasol is still proceeding with its Lake Charles Chemicals Project (LCCP) in the US, although it acknowledged that building costs will be $130 million higher because of the impact and delays from Hurricane Harvey in September. The total outlay is now expected to be more than $11 billion. In August 2016, the project’s budget was increased from $9 billion to reflect the potentially higher cost.
After LCCP is complete, the company said it will no longer execute large-scale commodity chemicals projects alone.
Sasol also noted that it will no longer invest in extra crude oil-refining capacity because of the large investments required to meet new local fuel specifications combined with a lack of competitive advantage outside its site in Secunda.