Sasol Improves 2030 Emissions Target, Sets Net-Zero Ambition

(Bloomberg) -- Sasol Ltd., South Africa’s second-biggest producer of greenhouse gases, set a target of cutting its emissions of climate-warming pollutants by 30% by 2030 and said it aims to have net-zero emissions by 2050.

The target, announced on Wednesday, is an improvement on a previous aim of reducing emissions by 10% by 2030 and comes as South Africa and its most-polluting companies come under increasing pressure to transition away from coal. 

Sasol produces about a fifth of South Africa’s greenhouse gases today, but plans to gradually move away from using coal to produce chemicals and motor fuels, shifting to natural gas instead. Beyond 2030, it intends to use green hydrogen and sustainable carbon.

The company is also tendering for the supply of 1,200 megawatts of renewable energy over the next nine years to run its operations, rather than relying on coal-generated electricity from state utility Eskom Holdings SOC Ltd.

“Everyone is in the same boat” when it comes to curbing emissions, Fleetwood Grobler, the company’s chief executive officer, said in an interview. “You can run but you can’t hide. You have to deal with this head on.”

In recent years, Sasol has been assailed by climate activists and its own investors for limited progress in cutting emissions. Its Secunda industrial complex in South Africa alone produces more greenhouse gases than Norway. 

Sasol’s pledge adds to an earlier ambition announced by Eskom, which runs 15 coal-fired power plants, to attain net-zero emission status by 2050. South Africa’s government has committed to cutting national greenhouse-gas emissions to a maximum of 420 megatons of carbon dioxide equivalent by 2030, down from a target of 614 megatons set in 2015.

Sasol’s plan is to cut its emissions by 2030 to 44.7 million tons from a 2017 baseline of 63.9 million tons. In addition it has, for the first time, set a 20% target for the reduction of scope 3 emissions -- those resulting from customers using the products they buy from the company -- compared with the 2019 level.

To do so the Johannesburg-based company, South Africa’s biggest by revenue, will halt investment in new coal resources and expects to spend between 15 billion rand ($1 billion) and 25 billion rand by 2030 on emissions reduction. Executive pay will be linked to attaining the targets.

It plans to bring in more gas to its South African plants from its own fields in Mozambique, as well as from liquefied natural gas terminals in the country via the port of Richards Bay.  It will also focus on improving the efficiency of its equipment. 

Green Hydrogen

The company currently produces about 2.3 million tons of so-called gray hydrogen from coal in its manufacturing processes. It ultimately wants to replace that with green hydrogen, which uses renewable energy.

“There is an option to run down Secunda and close it,” Grobler said in a presentation. “The other is to go big bag” and produce sustainable fuels, he said.

By June 2023 the company plans to start producing small amounts of green hydrogen for use in truck fleets operated by Toyota Motor Corp. and Imperial Logistics Ltd. as a trial. It has also bid to supply the German government with 50,000 tons a year of sustainable aviation fuel. 

There are “a myriad of options” to get to the net-zero target, Grobler said, adding that the company won’t commit to an end date for the use of any coal just yet. 

As part of its transition from coal it will set up a new business unit, Sasol ecoFT, which will focus on developing its proprietary Fischer-Tropsch technology.

Dividend Resumption

The company, which has been recovering from massive cost overruns at its Lake Charles Chemicals Project in the U.S., will resume dividend payments when its net debt falls below $5 billion and the ratio of net debt to earnings before interest, taxes, appreciation and amortization is below 1.5 on a sustainable basis, he said.  

“If the stars align it could be the end of this financial year,” Grobler said. The payout will be boosted again when debt falls below $4 billion.

The company also said:

• It has set a break-even oil price of $30 to $35 a barrel for its operations up to 2030
• It is targeting a return on invested capital of 12% to 15% until 2025 and more than 15% after that
• Capital spending to maintain its current assets is estimated at 15 billion to 25 billion rand a year

(Updates with comment from CEO in 12th paragraph)

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