Sasol: Major projects not imperilled

Johannesburg - Petrochemical giant Sasol said it had slashed capital expenditure by 40% over the next three years, but added that major projects such as the Mafuta coal-to-liquid (CTL) project in South Africa would not be imperilled as the group hunkered down for "volatile times".

"We will spend R15bn this year, and expect to spend the same level for the next two years," said Christine Ramon, Sasol's chief financial officer. "But we will adopt a flexible approach.

"The major prefeasibility and feasibility projects will continue for the big projects," she said. Ramon could not confirm, however, which projects would proceed.

"Small and medium-sized projects would be cut," said Pat Davies, CEO of Sasol. "It's not possible at this stage to say which because we haven't decided," he said.

Investment in developing further sources of oil from Mozambique, the expansion of Sasol's Secunda plant and the development of a gas-to-liquid (GTL) plant in Uzbekistan, all of which fall in the pre-feasibility stage, would be progressed.

In addition, the group would press ahead with Mafuta, a CTL plant planned for Mpumalanga province in South Africa. Further details of capital expenditure, as well as scheduling for the project, could be unveiled in a month, Sasol said.

Sasol confirmed it had been awarded a coal block in terms of a joint venture with Tata to develop a CTL project in India.

Acquisitions, however, were unlikely. "I can't see us making acquisitions in the current climate. In any event, Sasol has a organic growth strategy," said Davies, referring to the group's history of finding its own exploration and development ventures.

Competition fears

Davies said the group had set aside "a modest amount" in the event that it would have to pay fines in terms of an investigation into potential anti-competitive by the South African Competition Commission.

The investigation was launched by the commission earlier in 2009 after Sasol itself said it was nailing down areas where it could have contravened certain business laws.

"We've made a modest provision for other potential settlements, but there's nothing to report at this stage," said Davies.

In the six months ended December, Sasol paid R3.7bn in terms of anti-competitive behaviour it was found guilty of committing in the European wax industry.

Hedge

Ramon said the group would consider negotiating another hedge on its oil production given the "extended period of volatile and depressed market conditions".

Said Ramon: "The existing hedge will expire in May and we will consider a new hedge. We will make a decision before the end of the financial year [ended June]."

"We would like to put it [a hedge] in place," said Davies later. "It would depend on the economic environment."

The average crude oil price achieved was cushioned by the effect of the oil hedges which resulted in a net gain of R5.1bn, said news agency I-Net Bridge, which quoted a Sasol announcement on Monday morning.

- Fin24.com