Sasol cuts production to mitigate coronavirus impacts

SOUTH African integrated energy and chemicals company Sasol has announced production cuts to help mitigate impacts of the ongoing coronavirus pandemic and oil price volatility.  

Coronavirus has resulted in decreased energy demand, leading to a volatile oil market. This month even saw the Brent crude benchmark drop to a 20-year low of US$16/bbl and, in a historic slip, the West Texas Intermediate (WTI) crude benchmark was briefly negative on 20 April due to overcapacity and lack of local storage. This meant that sellers had to pay buyers to take their product.

Sasol’s liquid fuel sales have decreased by about 3% due, in part, to the impacts of coronavirus. The company expects its liquid fuels sales for the 2020 financial year to be about 50–51m bbl, based on the current lockdown in South Africa and a phased ramp up after restrictions are lifted. According to news provider The South African, the lockdown is to be lifted today, and then slowly phased out.

In response to reduced demand Sasol and its joint-venture partner Total South Africa have suspended production at their Natref crude oil refinery until further notice. Production at the 108,500 bbl/d facility was suspended as of 9 April, and the shutdown was successfully completed on 20 April.

Additionally, the company has reduced production rates at its Secunda Synfuels Operations (SSO) hub by 25%, until further notice. SSO operates the world’s only coal-based synthetic fuels manufacturing facility, which produces syngas via coal gasification and natural gas reforming. The site, which comprises two units, has a capacity of 160,000 boe/d. Sasol forecast that production at SSO for the year will fall to about 7.3–7.4m t, based on an operating rate of 75% for the rest of the financial year.

SSO’s residual capacity will be used to prioritise production of industrial chemicals whose demand has not been impacted. However, demand for chemicals used in mining and construction has reduced, and Sasol has therefore suspended production at its ammonia, nitric acid, and chlor-vinyl plants in Sasolburg, an industrial city in South Africa.

At its US Lake Charles Chemicals Project, which comprises a 1.5m t/y ethane cracker and six downstream chemical units, Sasol is continuing operations. Sasol aims to operate the cracker at close to nameplate capacity for the remainder of the year. Sasol expects losses at the site of US$50–100m, this year.

Despite the suspension of Natref and lower production at SSO, Sasol said on 08 April that South Africa’s demand for fuels and chemicals, including sanitiser, would be met. The company said that it was closely monitoring fuel demand in light of South Africa’s two-week lockdown extension, which brought the end date to the end of April.