Sasol’s CEO, Fleetwood Grobler, acknowledges that curbing emissions will be a significant challenge for the company. One of the key elements of Sasol’s strategy to reduce emissions by 30% by 2030 is to replace a quarter of the 40 million tons of coal it uses each year with natural gas which is more efficient and emits lower emissions. However, analysts are skeptical about this approach, with some investors in Europe expressing concerns about owning Sasol stock due to climate concerns.
Grobler stated that Sasol arrived late to the green transition and came up with a plan only in early 2021, but investors will be able to track the company’s progress over the next five years. He emphasized the need for Sasol to remain profitable, committed to greenhouse gas reduction targets, and relevant beyond those targets.
Sasol’s current source of natural gas is its own fields in Mozambique, which supply the fuel to its operations through the Rompco pipeline. The company is investing $1 billion to explore and develop more gas fields in the region as it is concerned about finding enough natural gas to replace coal beyond 2028. If needed, Sasol can also fall back on importing liquefied natural gas with plans to make a decision on this by 2025 and prepare for the supply over three years. However, import terminals for liquefied natural gas are still in the planning phases.
Sasol’s Secunda complex, its largest plant located about 130 kilometers from Johannesburg, will need to more than double the proportion of gas used from the current 7% to meet its emissions reduction targets, according to Grobler. However, activists have criticized Sasol for lacking adequate details, accountability measures, and incentives in its plan to achieve its emissions reduction targets.
Renewable energy will also play a major role in Sasol’s green transition plans. The company has signed agreements with developers, including Air Liquide SA and TotalEnergies SE, for almost half of the capacity it needs to meet its 1.2-gigawatt renewable energy goal. However, adding more renewables to the energy mix in South Africa may be challenging due to record power outages and a lack of grid connections for private clean energy projects.
Sasol is also exploring a green hydrogen project on South Africa’s west coast, which it hopes will provide an even cleaner fuel to potentially replace natural gas in the future. The Boegoebaai project includes a port developed by the state-owned port and rail company Transnet, but Grobler stated that it is still in the early phases and declined to estimate the cost of the green hydrogen plans.
In conclusion, Sasol’s plan to achieve net zero emissions by 2050 involves replacing coal with natural gas, increasing the use of renewables for electricity, and exploring green hydrogen as a potential cleaner fuel. However, the company faces challenges in terms of profitability, securing sufficient natural gas supply, overcoming grid connection issues for renewables, and addressing concerns raised by activists about the adequacy of its emissions reduction plan. Sasol’s progress towards its green goals will be closely watched by investors and stakeholders in the coming years.