After spending half-year capital of R8.6-billion in Southern Africa in the six months to December 31, integrated chemicals and energy group Sasol expects to invest a similar capital amount in the region in the current half-year.
Speaking to Creamer Media’s Engineering News after the company had reported a 63% plunge in shareholder earnings to December 31, Sasol executive VP for Southern African operations Bernard Klingenberg outlined the company’s significant ongoing commitment to the region, with a combined R16-billion-plus for its financial year going into both growth and sustenance.
Klingenberg said the half-year capital expenditure (capex) of R8.6-billion was “the kind of investment number that you’ll see going forward”.
While the company continued to look for growth projects, a large portion of the expenditure was related to sustenance of the value chain across its assets in Secunda and Sasolburg and its capital commitment in neighbouring Mozambique.
On the sustenance front, the company was engaged in the Train 17 oxygen renewal project as well as turbine replacement.
On the growth front, the company had just completed the first phase of the Fischer-Tropsch wax expansion project (FTWEP), with the second phase of that project scheduled to be commissioned in the first part of the 2017 calendar year.
Mozambique authorities had approved the company’s field development plan and a final investment decision would be taken on the R2.7-billion Loop Line 2 natural gas pipeline project.
“There are some very exciting opportunities in the Mozambique gas environment,” said Klingenberg, who emphasised the importance of Sasol working well with its Mozambique partners to beneficiate gas in the country.
The company was also hoping that a lot of that gas would find its way into South Africa to enable Sasol to augment its own gas supply as well as supply the gas to local industry as a whole.
Sasol had been piping gas into South Africa from Mozambique and using the gas in Mozambique itself for more than ten years.
The new gas that the company was hoping to find as part of the latest field development programme would augment that, with most of the gas currently used to produce transport fuels, chemicals and electricity.
Sasol was investigating various gas-to-electricity options with government and many participants in the independent power producer industry.
“We believe gas-to-power is a meaningful alternative in the energy mix for South Africa. It’s an environment that lends itself to partnerships and we’re busy with that process,” Klingenberg said to Creamer Media’s Engineering News.
The company’s first-half earnings plunged to R7.3-billion in the six months to December 31, from R19.5-billion in the prior period.
Headline earnings per share fell 24% to R24.28 and earnings per share to R11.97.
The board declared an 18.6% lower interim dividend of R5.70 a share.
Profit from operations halved to R14.9-billion on average Brent crude oil prices of $47/bl, compared with $89/bl in the prior period.
The price of Sasol’s basket of commodity chemicals declined 23%, with the impact of lower oil and commodity chemical prices partly offset by a 24% weaker exchange rate of R13.62 to the dollar, compared with R10.99 in the prior period.
The average margin for Sasol’s speciality chemicals remained resilient.
Sasol upped production volumes and contained cost increases below inflation.
Its Secunda Synfuels Operations (SSOs) production volumes rose by 3% to one-million barrels.
Total liquid fuels production by the company’s energy business increased by 4% to 1.1-million barrels on a higher portion of SSO’s volumes being used by the energy business.
The Oryx gas-to-liquids facility in Qatar delivered another solid performance with an average 90% utilisation rate.
Secunda Chemicals’ and Sasolburg Operations’ production volumes remained in line, with the increase in volumes from the FTWEP offset by lower polypropylene (C3) volumes.
The sales volumes of the base chemi- cals business decreased 13% on lower available C3 output and softer demand for certain commodity chemical products.
Sales volumes from the performance chemicals business were consistent after conditions had been normalised for the planned shutdown at the company’s ethylene plant in North America.