Sasol Climate Change Report 2022 - Book - Page 19
INTRODUCTION
RISKS AND OPPORTUNITIES
OUR FUTURE SASOL STRATEGY
GOVERNANCE
DATA AND ASSURANCE
RESILIENCE OF OUR PORTFOLIO (CONTINUED)
Physical risk modelling
Robustness testing against our scenarios to 2030
Our annual stress test aims to provide steer on the robustness of each business and our overall portfolio. Our decarbonisation targets, the
physical impacts of a changing climate on our business and opportunities in a low-carbon future are included in the resilience assessment.
The results of our quantitative and qualitative robustness testing is reflected below and on the next page and indicates the following
that directly shaped the Future Sasol strategy:
1 Fossil fuel feedstock acceptability is increasingly constrained as you move from the Current Pathway to the Net Zero scenario. In response, we are
gradually reducing our exposure to coal, contributing to a lower emissions profile for our existing operations in South Africa. We are also focusing
on a diversified feedstock mix that incorporates incremental gas and an ability to pivot to green hydrogen, when affordable.
2 Local market demand for liquid fuels, while slowly declining in the Net Zero scenario
compared to the Current Pathway and the Fragmented World, remains relevant to
2030. As a result, Sasol’s strategic imperative to be a partner of choice for mobility and
commercial customers so as to preserve returns remains valid. Moreover, we are taking
market positions in advanced mobility aligned to our strengths.
3 Over time, through our proof-of-concept and pilot projects, we are aiming to grow
the local green hydrogen economy and be a leading solution provider for the global
economy. Our areas of interest are green hydrogen for long-distance freight transport
and own use and green hydrogen derivatives, both locally and for export.
4 Sasol ecoFT currently relies on legislated blending mandates and grant funding. There
is positive pressure from emission-reduction commitments and developing regulatory
frameworks. Sasol actively monitors the landscape taking strategic bets through pilot
and proof-of-concept projects in areas of green hydrogen and sustainable feedstocks
while CCUS and DAC technology come down the cost curve.
5 Continued growth in the chemicals value chain globally
is beneficial. Products in the Sasol portfolio enable
product lightweighting1, as well as improved food
packaging, personal care and hygiene.
6 In the Net Zero scenario, there are fewer physical
impacts from a changing climate on Sasol than
there are in the Current Pathway (see 2022 CDP,
www.sasol.com); including loss of production,
damage to infrastructure and supply chain
interruptions. Because we are more resilient in
the Net Zero scenario, required sustenance capital
expenditure declines. On this basis, we continue
to invest to reduce emissions and build resilience
to changing weather patterns through updating
design specifications, maintenance programmes
and emergency preparedness plans.
Using the Sasol scenarios, we undertook a quantitative evaluation to assess the financial impact of the various outcomes on Sasol’s business.
The central line indicates the 2021 indexed values for profitability and oil price, which can be compared to the index values for each scenario in 2030.
Quantitative robustness testing of Sasol’s 2030 earnings
relative to 2021 (with mitigation)
Greater
than 2021
Quantitative robustness testing of Sasol’s 2030 earnings relative to
2021 (with mitigation) was assessed. Profitability in 2030 compared
to 2021 is greater in all pathways, except net zero. However,
technology learning rates and their availability are projected to
change and this will likely change the evaluation annually.
Several areas were highlighted that we are tracking and monitoring
to reduce vulnerabilities in our strategy. These areas or signposts
are indicated below (for additional risk information, see page 14):
• pace of technology development, commercialisation and
implementation, access to new technologies and an enabling
environment;
2021
• partnering and relationship requirements;
• carbon tax design, especially in the South African context;
• regulatory and policy changes impacting products and market
demand;
• varying stakeholder expectations;
• funding requirements;
Less than
2021
Current
Fragmented
Pathway
World 2030
Profitability index
Cooperative
Net Zero
World 2030
2030
Oil price index
• multiple sustainability obligations and associated costs
or investments required; and
• macroeconomic drivers, such as oil and rand/dollar exchange rate.
1. Lightweighting refers to replacing heavier components with light weighted plastic materials.
SASOL CLIMATE CHANGE REPORT 2022 18
Two GHG emission scenarios were modelled to understand physical
impacts on our operations: the IPCC’s high emission scenarios (referred to
as “Representative Concentration Pathway (RCP)” 8,5) and an intermediate
emission scenario (RCP 4,5). RCP 4,5 and 8,5 were chosen based on the
wide range of changes in GHG emissions. These pathways informed the
development of downscaled climate models developed by the Council for
Scientific and Industrial Research (CSIR), providing an 8 km spatial resolution
for Southern Africa and 50 km for the United States. Our prioritised sites
for understanding physical weather impacts were the CPF (Mozambique),
Secunda and Sasolburg (South Africa) and Lake Charles (United States).
We supplemented and bias-corrected the modelling, with site-specific
historical weather data. Our modelling simulations spanned 1960 to 2099,
which encompasses the time frame for Future Sasol’s strategy. In general,
the modelling indicated that surface temperatures could increase by 1 – 4°C
by 2050, with an increasing number of extreme hot days. Projected rainfall
patterns differ between the sites. For Sasol Energy in Mozambique, rainfall
is projected to increase, while for sites in South Africa, no change in average
rainfall is projected, but rather an increase in the intensity and frequency
of extreme rainfall events. For Sasol Chemicals in the United States, a similar
rainfall trend to South Africa is likely to be experienced. In Mozambique and the
United States, cyclones and hurricanes are expected to become more intense.
These results have informed the development of proactive climate
change responses. In addition, the downscaled modelling results
have been incorporated into our scenarios:
NET ZERO
The weather-related impacts on Sasol’s people, communities
and assets are reduced, with fewer production losses and lower costs
for adaptation measures.
COOPERATIVE WORLD
Sasol’s people, communities and assets are exposed to some
physical impacts of climate change, requiring more investment
into adaptation measures.
CURRENT PATHWAY
To build the resilience of our people, communities and assets,
Sasol’s investment costs in adaptation are higher than in the
Cooperative World. Hurricanes in the United States and flooding and
heavy rainfall in South Africa lead to some production downtime, however
this is somewhat cushioned by investment in adaptation measures.
FRAGMENTED WORLD
Sasol’s adaptation investment would need to be significantly
higher to build the resilience of our people, communities and assets.
Weather-related impacts would result in more production downtime.
Sasol Energy incorporates adaptation response measures, such as
emergency preparedness, updating design specifications and tailored
maintenance schedules. These measures come with more costs than those
required for our United States assets. This is because of the age of Sasol
Energy’s assets and the fact that they were built without having a rapidly
changing climate in mind (for further information on our risks see Risk
management page 13).
