Sasol to avoid ‘big bang approach’ in new emissions target

Sasol has delivered on its promise to up its “green” ambitions, committing to a 30% cut in its carbon emissions by 2030 and to reaching net zero emissions by 2050.

But though the petrochemicals group has set out fairly detailed plans to invest R15bnR25bn to reach the 2030 target, it will decide only later on a clear “pathway” to reach net zero, a target which on one estimate could cost as much as $45bn (about R658bn) to achieve.

Sasol CEO Fleetwood Grobler said on Wednesday the group would seek partnerships to reach its 2050 net zero target and might have to take on only 10% of the cost, which Sasol believes will come down. The group has not done detailed estimates as there are so many pathways it can take.

Grobler cited estimates by JPMorgan that if Sasol were to take on the entire cost of converting its operations from coal to green hydrogen and sustainable carbon by 2050 it would require 23GW of renewable energy, and investment of at least $45bn. However, he said: “We don’t need to take a big bang approach.”

The group would roll out its 2030 strategy to reduce emissions, which will rely on gas as a transition fuel, as well as on the group’s plans to add 1,200MW of renewable energy, and would avoid investing “regret capital” in projects that could become white elephants.

It would watch the signposts on the hydrogen and carbon capture economies to identify the pathways to follow. Once the cost of hydrogen comes down to $2/kg or less, from the current $5, it starts to become a viable alternative to coal as a fuel source for Sasol’s operations, which convert coal (and gas) to fuel and chemicals.

Sasol is SA’s second-largest emitter of greenhouse gases after Eskom, and its

Secunda plant is the single most carbonintensive on the planet.

It has been under increasing pressure from investors and environmental activists to speed up the pace at which it plans to decarbonise its operations.

The new targets announced at an investor day on Wednesday have tripled its aspiration to reduce emissions by 2030, and put in place plans to transform the group by 2050.

Priscillah Mabelane, Sasol’s executive vice-president: energy, told investors the group has made clear and bold choices, including no investment in new coal reserves, introducing additional gas as a transition feedstock, investing in integrated renewable energy and accelerating green hydrogen at scale.

The group is replacing 1,200MW of coalbased power over time with renewable enerBy

gy and is in a joint venture with Air Liquide to install the first 600MW at Secunda.

The pace of the transition in feedstocks will depend on the technologies and their cost — in particular how fast the cost of “green” hydrogen, made with renewable energy, comes down, making it a viable alternative to coal.

Sasol is already a leader in the production of so-called “grey” hydrogen, from coal and gas, which is used in its processes, and it emphasised at this week’s investor day that its proprietary Fischer-Tropsch technology was “agnostic” and well suited to feedstocks such as hydrogen or gas rather than coal.

The group expects to produce its first green hydrogen by June 2023 and to expand this post-2030. It has entered a number of strategic partnerships to explore the potential of the hydrogen economy, the latest of which was with Imperial Logistics, announced this week.

Mabelane said the labour impact of the transition was not significant up to 2030, though Sasol has set up a Just Transition office to mitigate any social and labour impacts.

Grobler said Sasol was embracing the energy transition as an opportunity to invest in new sustainable businesses.

Sasol’s new targets come in a context in which the cabinet last week approved a more ambitious pledge by SA to reduce its carbon emissions, ahead of the COP26 climate change summit in Glasgow in November.

Grobler said Sasol’s announcements this week meant it would be able to deliver a contribution to reducing SA’s emissions that was well within the 18%-27% reduction now targeted by the government.

If SA could achieve the middle of the range it would be a great outcome, Grobler said. He and other CEOs had overseen the study by the National Business Initiative which had shown it was plausible for SA to get to net zero carbon emissions by 2050, premised on renewable energy and on negating SA’s dependence on fossil fuels.

Ninety One portfolio manager Hannes van den Bergh said Sasol had set very ambitious targets. “Now the execution will be key. They need to transform the business. We are going into a new era for investing: performance is important but it is much more than performance, with a lot of focus on decarbonisation and social impact.”

Sasol’s share price used to trade at 10 times headline earnings but now barely at six times. “This shows the impact of concerns about the longevity of the company and about its carbon footprint. Management is trying to address this, and telling the market it will have enough cash to pursue a strategy to reduce its carbon footprint,” Van den Bergh said.

Now the execution will be key. They need to transform the business

Hannes van den Bergh

Ninety One portfolio manager