Sasol looks to gas as oil price languishes

(Shutterstock)
(Shutterstock)

Johannesburg - Petrochemicals company Sasol [JSE:SOL] is looking at building a 3 000 MW gas-to-power facility in South Africa as part of efforts to counter falling prices, outgoing chief executive David Constable told Reuters on Monday.

"I have always thought gas is something to go after," Constable said, after announcing that full-year earnings fell by 17% and a lower dividends.

The government is planning to launch a gas-to-power procurement programme in September, with bids expected in the first quarter of 2016.

Sasol said it had identified three possible locations to build a facility, based on proximity to special industrial zones and access to transmission lines.

The company, which relies on oil for 40% of its revenue, said it also aims to expand into the piped gas sector serving both the commercial market and its own facilities.

Sasol's loop-line, which connects to the main gas pipeline between South Africa and Mozambique, is being expanded.

When completed in early 2017 it will feed a further 212 petajoules of natural gas to South Africa.

Sasol's annual headline earnings per share fell to R49.76 from R60.16 a year earlier. The company lowered its dividend to R11.50 from R13.50.

Shares in Sasol, which said the fall was partly offset by a weaker rand exchange rate, higher sales and cost cuts, were down 0.8% as of 12:09 GMT.

The world's top maker of motor fuel from coal, Sasol is cutting costs through measures including delaying major capital projects and lower dividends.

The price of Brent crude oil fell by more than a third during the reporting period, which ended on June 30, with shares in the company falling by a similar margin.

Sasol said its sales volumes of liquid fuels increased by 5% and performance and base chemical sales were up by 2%.

The company said its plans to "conserve cash" had enabled it to pursue growth projects in southern Africa and the United States.

It cut 2 500 jobs through "voluntary separation" and early retirement and plans to freeze 1 000 new vacancies.

Sasol said it expected Brent to trade at $50 to $60 per barrel during the 2016 financial year, which could hurt business.

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