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Sasol signs LNG term sheet as it prepares for R20bn-plus coal-to-gas switch at Secunda

Sasol CEO Fleetwood Grobler

Sasol CEO Fleetwood Grobler

Photo by Creamer Media's Donna Slater

21st February 2022

By: Terence Creamer

Creamer Media Editor

     

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Energy and chemicals group Sasol has approved development funds for the first phase of a project that is designed to increase the Secunda complex’s ability to use gas instead of coal to produce fuel and chemicals.

The fuel switch is central to Sasol’s initial commitment to reducing its greenhouse gas emissions by 30% by 2030, even though the company acknowledges that gas can only be used as a “transition fuel” if it is to meet its longer-term target of being net-zero by 2050.

CEO Fleetwood Grobler tells Engineering News that the funds will be used to prepare the “first tranche of gas reforming capacity in Secunda by 2025” and comprise about 30% of a larger R20-billion to R23-billion initiative to transition the facility away from coal.

“I think this is a very important signal that we are now putting our money where our mouth is with respect to processing capacity and to prepare ourselves to be able to reduce our coal use in a phased manner.”

Gas reforming, Grobler explains, is required to ensure that the hydrogen and carbon-monoxide ratios are corrected before the gas is used in the Fischer-Tropsch process to produce fuels and chemicals.

The JSE-listed company has also signed a draft term sheet for the delivery, from 2026, of liquefied natural gas (LNG) to the Mpumalanga complex, but Grobler says it is premature to disclose the identity of the counterparty.

Between 40 PJ and 60 PJ of LNG will be required yearly by 2030 to replace some nine-million tons of coal, with Sasol having already announced that it will make no further investments into new coal reserves.

Grobler says the LNG will initially be imported through Maputo, Mozambique, but reports that discussions are also under way regarding a second import terminal at Richards Bay, in KwaZulu-Natal.

The LNG will replace tapering natural gas supply from the Pande and Temane fields in southern Mozambique and increase the gas volumes available for Secunda’s switch from coal.

However, the immediate focus at Secunda is to stabilise coal supply, rebuild stockpiles and improve coal quality.

Although Sasol’s interim results to December 31, 2021, recovered strongly on the back of rebounding markets – with earnings before interest and tax increasing by 12% to R24.3-billion – the results were marred by materially lower production volumes at Secunda and five fatalities.

The slump in Secunda’s volumes has been attributed mainly to coal-related issues, including safety-related mine closures and a slower-than-planned transition to a full-calendar operating model at the mines.

Sasol has increased its coal purchases from third-party suppliers in an effort to recover its stocks, which fell to about 900 000 t, but have since recovered to 1.1-million and should be back to the 1.5-million target before the end of June.

A recovery plan is also being implemented, but Sasol has nevertheless lowered its full-year output forecast for Secunda to between 6.7-million and 6.8-million tonnes from an initial forecast of 7.5-million tonnes.

It will provide a new forecast for the 2022/23 financial year in August.

Grobler also announced that Riaan Rademan had been appointed executive vice president for mining, effective March 9.

Rademan worked for Sasol for 36 years before taking up the position of Foskor CEO in July 2019.

“Riaan’s mandate is to lead mining through its current challenges and position the business over the coming months for enhanced and sustainable productivity, prioritising safety in our operations,” Grobler says.

Edited by Creamer Media Reporter

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