Simon Baloyi, the newly appointed CEO of Sasol, is preparing to jack up the amount of money the energy giant spends towards its future, saying R1bn annual spending simply won’t cut it in a world increasingly shunning fossil fuels.
“We are spending around a billion rand on this, which I believe is insufficient. To answer your question, ‘yes, we should increase this investment’,” he told Business Day Spotlight, a podcast that has hosted newsmakers such as Reserve Bank governor Lesetja Kganyago and outgoing Naspers CFO Basil Sgourdos.
His comments underline the mounting pressure facing all companies vulnerable to the global energy transition as tighter government restrictions and accelerating technological advances threaten to upend them.
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Sasol, which spends between R28bn and R30bn a year focusing primarily on maintaining existing operations, is at the heart of the national energy transition. Its coal-to-liquids plant in Secunda is both a boom and a bane. While it profits handsomely, it also faces criticism from activists for its environmental impact, with some of them lobbying for stricter emission targets that may put the commercial viability of the plant in serious doubt.
But Baloyi, a Hammanskraal-born chemical engineering graduate, said it would be unhelpful to put the commercial viability of the plant in question or lobby for its premature shutdown.
“In my mind, it’s not about closure; it’s about building on what we have. The carbon intensity of petrol will naturally decline as consumers make choices between petrol cars and electric vehicles,” he said.
“We will study and move with the transition. Looking to 2040 or 2050, Sasol will still be here, but in a completely different form. We will play a bigger part in the energy, hydrocarbon and mobility sectors. We already have the tools to participate in the future as it unfolds.”
One of those future products for Sasol is hydrogen, which it has been producing for about 75 years. However, the type of hydrogen that is needed to secure its future is not yet mainstream and is not cheap to produce. Almost all the hydrogen produced today is “grey” hydrogen, used mostly to produce ammonia and fertiliser and to refine oil. Sasol sits on about 3.5-million tonnes of grey hydrogen and makes about 6 tonnes of green hydrogen a day.
“I believe we can start catalysing the hydrogen economy with both grey and green hydrogen. We don’t have to wait any more; hydrogen is here now. If the economy and market start absorbing it and we see the ecosystem building up, we can produce more.”
Baloyi has started initial talks with the platinum industry to kick-start a hydrogen economy. The jury is still out on the role of platinum in an eco-friendly industry, with some expressing confidence in the white metal’s use in electrolysers for green hydrogen production and fuel cells for cars, trains, trucks and ships.
“There’s space for hydrogen. There is a lot of work happening on electrolysis today. The current hydrogen price is a barrier but it will come down. We can already start catalysing the market with the grey and green hydrogen we have,” Baloyi said.
The 2021 Energy Transitions Commission, a coalition of over 45 leaders from global energy sectors and financial institutions and environmental advocates, projected that hydrogen could make up 15% of global energy by mid-century, from virtually nothing today.
Aside from hydrogen and chemicals, Sasol is also staking its future on liquefied natural gas (LNG). Baloyi referred to the minerals & resources ministry’s recently released gas master plan, saying it outlined a promising future for the gas market.
“You can see there is a fantastic gas market that will unfold in the country. We already have the pipeline network — over 800km from Mozambique to Gauteng and almost 3,000km of gas pipeline network in total,” he said.
One of the key elements of Baloyi’s strategy is the emphasis on partnerships.
“We have learnt not to undertake everything independently. As we grow the company, we will partner with others,” he said. He was referring to the company’s $12.9bn (or R230bn-plus in today’s money) investment in a chemicals project in Lake Charles. The project faced delays, cost overruns, poor management oversight and weaker market prices, turning it into a financial disaster.
“You will see announcements about joint ventures with various partners. We do have extraordinary capabilities but those capabilities also require us to be prudent as we embark on transforming the organisation.”
To listen to the full conversation, visit Businesslive.co.za
motsoenengt@businesslive.co.za
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