Sasol May Gain From Lower Natural Gas Prices

Emerging Markets Investor: Company to watch

By Gordon Platt

Sasol is a prime example of a successful multinational company based in South Africa, where it mines coal to provide the raw material to produce synthetic fuels and chemicals. Sasol also uses natural gas to make more than 200 fuel and chemical products that are sold worldwide.

The company’s gas-to-liquids (GTL) technology stands to benefit from a widening price differential between natural gas and oil. In an update to “Sasol followers” last month, Christine Ramon, the company’s CFO, said recent technology developments in the cost-effective extraction of shale gas present significant opportunities for Sasol to expand its GTL activities. “As a result, we intend to actively pursue growing our upstream gas reserves,” Ramon says.

Gas prices have declined relative to oil as new horizontal drilling and rock-fracturing technologies that enable the extraction of natural shale gas have proved viable. Large new reserves have already become available in the US, and more discoveries are also expected in other parts of the world, including South Africa.

Sasol expects crude oil prices to bottom out around $70 per barrel, Ramon says. “The impact of the crude spillage in the Gulf of Mexico on oil prices has yet do be determined,” she says. “The greatest risk to our oil price forecast remains a protracted global recession.”

The company’s international expansion projects are on track, Ramon says. A possible investment decision on a coal-to-liquids plant in China will be made by the end of this year. A feasibility study on a GTL facility in Uzbekistan is also under way.