Sasol Integrated Report 2023 - Book - Page 60
INTRODUCTION
ABOUT SASOL
STRATEGIC OVERVIEW
CREATING VALUE
PERFORMANCE
GOVERNANCE AND REWARDS
ADMINISTRATION
SASOL ENERGY AT A GLANCE // Leading the energy transition in Southern Africa CONTINUED
RESET ACTIVITIES //
Safety
We are relentless in our commitment to pursuing
Zero Harm as an operational reality.
Regrettably, we lost two colleagues in work-related
incidents – one at Sasol Mining, one at Secunda
Operations (SO).
Secunda Operations volume
improvement plan
Over the past 24 months, our production volumes at
SO have been significantly impacted by the erratic
quality and availability of coal as well as by issues of
plant reliability. We implemented comprehensive
plans to restore plant stability and have seen a
significant improvement since January 2023.
To increase productivity, we implemented a ‘full
potential’ plan at Mining which – along with
additional gas supply into the facility – enabled
improved production volumes at SO.
Advancing Mozambique gas production
We made good progress at our operations in
Mozambique where gas production is coming off its
plateau in 2028. The drilling campaign was executed
safely amid dire weather, including Cyclone Freddy.
The team completed five new wells, bringing the total
well count to 24. To ensure security of supply to
South Africa, the drilling campaign will continue and
we will extend drilling to other areas adjacent to
the existing fields. Our exploration also resulted in
a positive gas discovery in PT5-C, which is in
southern Mozambique with closer integration
to our existing facility.
Delivery of Sasol 2.0
COST MANAGEMENT – We made progress in
delivering on our Sasol 2.0 targets by focusing
on efficiency, digitalisation and by challenging
external spend through dedicated programmes
using agile principles and global category
benchmarks. We embedded Sasol 2.0 as a way of
working and are on track to deliver on the FY25
full ambition target.
GROSS MARGIN – We made very good progress
in identifying opportunities that increase volumes
and margins. These include a review of the
product slate from SO as well as improving the
operational performance of the production assets.
We will continue our efforts and capture higher
margins through improved customer offerings
and improved yields, efficiencies and throughput.
CAPITAL – Our Southern Africa business is capital
intensive and in the year we continued to invest
in statutory maintenance, a full shutdown at SO,
compliance activities and advancing the drilling
programme in Mozambique. As such, our capital
spend was slightly higher than in prior years.
Performance
Our EBITDA for the year of R43,1 billion is 2% higher than the prior year due to higher rand oil prices and
product crack spreads. This benefit was partly offset by internal challenges that we faced in the first half
of the year. We have responded to this difficult environment with decisive actions, unwinding inventories,
sourcing additional gas to compensate for poor coal quality and implementing volume recovery plans.
Accordingly, the improvement in our performance in the second half of the year was significant. We have seen
a notable improvement in operational reliability and have progressed with the external coal purchasing
programme to supplement Mining’s production and meet the coal demand for our Secunda Operations (SO).
Secunda Operation’s production increased by 14% in the second half and we exceeded the volume targets
communicated in December 2022. The volume recovery plan and demonstrated performance over the past
six months confirms our ability to run complex plants efficiently and reliably consistent with our historical
performance. This recovery gives us a clear path forward to consistently run our operations at maximum
rates. Coal quality however remains a key variable and focus area.
In the year, the business recorded an impairment
of R35,3 billion relating to the liquid fuels component
of the Secunda refinery. The implementation of the
emission reduction roadmap (ERR) to achieve a 30%
reduction in greenhouse gas emissions by 2030 and
comply with the requirements of the Air Quality Act
results in lower production volumes post 2030 and
as such an impairment was recognised on the liquid
fuels component of the Secunda complex. Further,
the increasing cost of coal, capital investment to
implement the ERR and cost of compliance was
included in the impairment calculation. Optimisation
of the ERR is ongoing and there are a number of
technology and feedstock solutions underway to
partially recover volume post 2030 however, the
maturity thereof needs to be progressed before it
can be incorporated in the impairment calculation.
The chemical assets in the Secunda complex however
remain resilient given the higher margin yielding
products that are produced.
initiatives, in turn supported by higher production
at SO. We continued to invest in enhancing customer
offerings, scaling of the loyalty programme and driving
the use of digitalisation.
In our upstream gas operations in Mozambique,
we delivered a strong production performance
achieving the upper end of our market guidance range
of 111 – 114 bscf. Production was 2% higher than the
prior year, underpinned by additional wells being
brought online. Construction on the gas supply
infrastructure of the PSA project was completed,
and we await third party verification to confirm volume
estimates before beneficial operation is achieved.
We have invested US$530 million in Mozambique in our
plateau extension projects, securing future gas supply
to South Africa. More recently we had a discovery in
PT5-C in Mozambique close to our operations. This was
the first discovery for Sasol since 2008. Natural gas and
methane-rich gas sales volumes in South Africa were
3% and 1% lower respectively when compared to the
prior year due to lower customer demand largely
associated with loadshedding.
However, we need to focus on fixing the coal
quality and have made good progress with a
technology solution on which we anticipate
taking a final investment decision by the end
of calendar 2023. We see the ‘Reset’ as a critical
priority for FY24 to build resilience in the
business. While delivering on our Sasol 2.0
commitments, we have unlocked significant
value by enhancing our operations and making
our business more market and customer
oriented.
In marketing and sales, we continued to progress
our work to place molecules in the highest yielding
margin portfolios. Liquid fuels sales volumes for the
year was 53,7 million barrels, which is within our
market guidance range of 52 – 55 million barrels and
2% lower than previous year. The improved
performance in the second half of this year was
underpinned by the implementation of our approach
to shift volumes to higher margin portfolios in
mobility and commercial, and supported by improved
customer convenience offerings and marketing
SASOL INTEGRATED REPORT 2023
59
The changing liquid fuels landscape – marked by a
decline in demand for petrol and the rapid increase of
new entrants into the market – continues to pose a
risk to our inland refineries.
OUTLOOK
We have demonstrated that our asset base in
South Africa is strong and can deliver maximum
proven volumes with the optimum coal quality.
Our asset reliability issues have improved and
the run-rates over the past six months
demonstrated that the plants are capable of
running at historically high production rates.
We have a highly experienced technical,
commercial and marketing team who can
navigate through the challenges associated
with coal quality, free cash flow generation,
legal and regulatory matters and progressing
the emission reduction roadmap with technical
solutions that are affordable. We see the
potential in this business and are excited by
the opportunity to reinvent and provide
sustainable energy solutions to the country.
Our focus in FY24 on safety, operational
excellence, capital discipline, cost management,
customer service and continuous improvement
will help ensure that we can deliver results
and be ready to grow smartly when market
conditions improve and opportunities present
themselves.
