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Sasol bails on $13-$15B US GTL project, divests from Canadian shale; no new greenfield GTL

At the company’s Capital Markets Day 2017 in Johannesburg, South Africa, Sasol management said that the company will no longer pursue its proposed ) project in the US (earlier post) and furthermore will not invest in additional greenfields gas-to-liquids (GTL) projects. In January 2015 Sasol announced it was delaying a final investment decision on the proposed project near Lake Charles, Louisiana to conserve cash in response to lower oil prices. The estimated cost of the project ranges between $13 billion and $15 billion.

Sasol CFO Paul Victor said that while its current GTL assets are generating good returns and cash flows, the value proposition for Sasol to build new GTL projects is now uneconomic against a volatile external environment and structural shift to a low oil price environment.

Joint President and Chief Executive Officer (CEO), Stephen Cornell added that Sasol will maintain its industry-leading position in Fischer-Tropsch (FT) technology.

We will continue to work on opportunities to optimize and improve our 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 FT technology.

—Stephen Cornell

Sasol has also decided not to invest in any additional crude oil refining capacity.

Sasol has completed reviews on more than half of its global assets, underpinned by the company’s drive to improve asset performance, not liquidity requirements. Thus far, the reviews have confirmed that the majority of the company’s assets will be retained and clear improvement actions have been defined for each.

The company will continue to develop its $11-billion ethane cracker project in Louisiana; the project is almost 80% complete. The cracker converts ethane into ethylene, one of the building blocks of the petrochemical industry, and the foundation for polyethylene—the most commonly used plastic in everyday consumer goods and industrial applications, such as food packaging, bags, toys, automotive interiors, power cable coatings and more.

The reviews conducted to date did, however, identify the Canadian shale gas asset as being non-core. In this respect, Sasol will commence a structured divestment process involving Progress Energy, the partner in this asset.

Sasol said that the key megatrends and assumptions informing its strategic choices are global population growth and further urbanization, the move to even greater efficiency and performance, in all aspects of business, supported by digitalization and sustained volatility in both oil prices and exchange rates. Sasol’s foundation businesses are cash positive at a US$40 per barrel oil price.

In developing our strategy, we considered both the opportunities and risks we face, informed by developments in the external environment. It is clear that megatrends influential to our business will result in greater demand for chemicals and energy products in key markets we serve.

—Stephen Cornell


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