Sasol Climate Change Report 2022 - Book - Page 17
INTRODUCTION
RISKS AND OPPORTUNITIES
OUR FUTURE SASOL STRATEGY
GOVERNANCE
DATA AND ASSURANCE
RESILIENCE OF OUR PORTFOLIO
Sasol’s climate scenarios
Annually, we undertake detailed analyses to develop
a bottom-up view of the global energy landscape, taking
into account the global value chain.
Our analysis considers upstream chemical feedstock production,
investments in new production and refining capacity, market
demand, customer preferences, buying patterns, industry plant
utilisation, technology development and legislation, as well as
country and company targets. From this, we determine price sets
for all applicable commodities including coal, oil, refined products
(including petrol, diesel and jet fuel), gas, chemicals and electricity.
In 2022, we revised our existing scenarios in line with accelerating
megatrends and a global operating context that is far more disruptive
and volatile. The 2021 scenarios of ‘Current Pathway’,‘Cooperative
World’ and ‘Net Zero’ were revised and a fourth scenario, ‘The Fragmented
World’, was added. These scenarios are more challenging and are
therefore not comparable to the previous set of scenarios. For example,
the Fragmented World takes into account deteriorating relationships,
the increased need for energy security, the challenging economic
circumstances in some countries, changing relationships between
countries, changing supply chains, availability of raw materials and
the impact of this on costs and economics. Changes include:
•revised oil prices;
•revised market demand for products;
•adjusted gas demand and price;
• transformed and new industry structures, such as electric
vehicles with related infrastructure;
•new solar and wind power, as well as hydrogen economy
technology and cost developments; and
•new refineries with higher chemical yield and alternate
chemical feedstocks.
We still consider sources such as the IEA Sustainable Development
Scenario (SDS) and the Net Zero scenario, supplemented by other net
zero and 1,5°C-type scenarios. The future is uncertain and there are still
many unknowns in terms of technology availability and accessibility,
adoption rates, affordability and government and company priorities.
Our scenarios are therefore regularly reviewed and updated.
Net Zero
Cooperative World
• The target temperature of ~1,5°C is globally reached.
• Strong global cooperation allows for more global climate
change mitigation. Activities are however not sufficient,
with temperatures increasing in a range of 1,5°C to 2°C.
• All countries are completely aligned on the ambition of net zero
and that the required technologies, affordability, behaviours,
legislative enablers and cooperation activities, as well as funding
activities are in place to enable the transition. Moreover, we
assume that the required skills and re-skilling actions are available
and sufficient employment opportunities will be in place.
• There are rapid technology advances in solar, wind and
batteries, as well as technology transfer to less developed
regions. This allows costs to fall rapidly over time resulting in
implementation.
• Strong penalties, legislation and policy are in place to direct the
desired behaviour and consumption pattern changes.
• Energy efficiency gains, lifestyle changes, legislation, policy and
political commitments result in reduced energy consumption.
• There are large investments in the energy transition, with
developed countries supporting developing countries financially,
technologically and with capacity building.
• Increased reliance on electricity networks for energy distribution
is accompanied by significant investment in grid infrastructure
and interconnectivity between countries. Electricity transmission
networks and energy distribution costs have reduced significantly
as global cooperation is accelerated.
• There is a significant reduction in fossil fuel demand and a
commensurate growth in green electricity through the roll-out
of solar and wind energy, as well as storage capabilities. Cost
curves of renewable energy and green hydrogen have dropped
significantly on the back of technology advancements, regulatory
transformation and sourcing expansion.
• Global liquids demand for transport peaks in the early 2020s and
this is further entrenched by a high penetration of electric, hybrid
and fuel-cell vehicles, with the associated roll-out of charging
infrastructure globally as the years go by. Fossil jet fuel demand is
reduced by consumption and operational efficiency improvements,
behaviour change and modal transport shifts, supported by strong
penetration of SAF, including PtL.
• Global natural gas demand peaks in the early 2020s, with major
reductions in gas demand in the power sector. Despite this,
industry still remains reliant on gas due to substitution difficulties.
• Demand for petrochemicals is dampened by strong recycling and
circular economy options. Feedstocks other than fossil-based
inputs need to be implemented at the same time to not influence
costs for the consumer.
• All countries are investing extensively in mitigation efforts,
resulting in fewer adaptation requirements.
• Many countries cooperate on technology development,
commercialisation, availability and accessibility. Funding is also
forthcoming to assist in reducing dependence on fossil-based
energy and advancing the energy transition.
• Global coal consumption comes under increased pressure.
Global liquids demand for transport peaks in the mid-2020s,
driven by increased penetration of new technology vehicles,
charging infrastructure, engine efficiency, modal shifts and
behaviour changes, where affordability is spurred by technology
sharing and subsidies. Oil-derived jet fuel demand growth is
flatter and starts to decline in the mid-2030s due to changing
behaviour, consumption efficiency, operational improvements and
penetration of SAF.
• Global natural gas demand peaks in the early 2030s and is
largely used as a peaking fuel in the power sector, with efficiency
improvements lowering demand.
• Demand for petrochemicals is dampened by behaviour and
lifestyle changes, recycling and circular economy developments.
Strong cooperation among nations is required to close the gap
left by lower fossil-based feedstocks due to declines in oil and
liquids availability.
• Many countries are investing extensively in mitigation efforts,
however some adaptation efforts are required.
The updated scenarios stretched the range of potential outcomes from
‘favourable’ to ‘unfavourable’ for Sasol, with potential futures ranging
from a world wrestling to recover economically, building new relationships
and supply chains, to one strongly and even more focused on curbing
climate change. Key characteristics of each scenario are detailed alongside.
Given the vulnerabilities of the Sasol Energy business to shifts in local
dynamics, we also updated local scenario views focusing on how industry
sectors could be impacted and what new sectors could emerge. The Net
Zero scenario is aspirational and was developed taking a ~1,5°C temperature
goal as the endpoint and working it back to today.
SASOL CLIMATE CHANGE REPORT 2022 16
