Sasol to evaluate splitting chemical business after US project

Houston — Sasol, the world’s largest maker of fuel from coal, will consider carving out a separate company from its expanding chemicals business.

The company will focus on a potential split after its $11.1bn chemicals project near Lake Charles, Louisiana, is completed in late 2019, co-CEO Steve Cornell said by phone late Tuesday.

"It’s a scenario we evaluate, but it’s not a scenario which is imminent," co-CEO Bongani Nqwababa said in the same interview from Houston.

Sasol is shifting strategy as it expects low oil prices to persist, while the executives say its specialty chemicals used in lubricants, inks, metalworking and catalysts enjoy a competitive advantage.

The Johannesburg-based company last week said it would not invest in more oil-refining capacity and cancelled plans to build a $14bn gas-to-liquids fuel project at the Louisiana site.

The potential split comes as the Louisiana project marks a "step change" in Sasol’s production of chemicals, which already generate half the company’s profit, Cornell said. The new plant will boost earnings by at least 20% within five years, according to Nqwababa.

The project is part of a US chemicals construction boom as shale fracking gives producers such as DowDuPont a cost advantage. Newly abundant natural gas liquids such as ethane are cheaper than the oil-derived naphtha typically used to make chemicals and plastics outside the US

Louisiana hub

Sasol’s project will convert ethane to ethylene, which will be converted into polyethylene plastics and other products. Polyethylene production at Lake Charles should begin late in the third quarter of 2018, with an ethylene plant to follow in the fourth quarter and a second polyethylene unit starting in the first quarter of 2019, Cornell said. Specialty chemical plants will come online through the end of 2019.

The company is already evaluating further spending to boost output after the project’s startup and Sasol’s Louisiana hub will be the focus of investments for decades to come, Cornell said. To minimise risks and keep annual project costs to about 10% of the company’s market value — currently about $20bn — additional large investments will depend on teaming up with a partner, he said.