Sasol’s woes could ‘tarnish reputation as global leader’
Mathabo le Roux
Trade and Industry Correspondent
Posted to the web on: 23 May 2007
businessday.co.za
SASOL shares fell more than 5% yesterday after the petrochemical group said its flagship gas-to-liquids technology Oryx plant was not performing optimally due to operational problems.
Now an analyst has warned that the hiccups could point to grave problems with Sasol’s technology. If so, the group’s reputation as a developer of alternative energy sources could be tarnished.
Sasol, in a cautiously worded statement to the JSE’s news service, said the output of its Oryx gas-to-liquids plant in Qatar, which has been operational for more than three months, was lower than planned, with increased production inhibited by the higher than expected output of fine material resulting from the break-up of the catalyst. The fine material then had to be handled downstream.
The fine material was constraining the overall throughput of the downstream units, the company said.
A Bloomberg report quoted Sasol GM Lean Strauss as saying the plant was operating at a third of its capacity of 34000 barrels per day (bpd) and that the group would likely need to spend tens of millions of dollars to install new equipment.
Trying to brush off concerns about deeper problems, the Sasol statement said the challenges were limited to individual items of equipment and while the problems would prolong the ramp-up period, the group was “fully confident that the challenges will be overcome”.
But analysts are sceptical about Sasol’s optimism and the market gave the group a clear no-confidence vote with shares losing R15 in their biggest one-day drop in eight months, to close at R261,01, from a high of R276 at the start of trade yesterday.
Vunani Securities analyst Campbell Parry said the prognosis could be more serious than Sasol was suggesting.
“The problems in Qatar go further than a fairly marginal financial impact.
“Although management did not actually admit it, we believe catalyst hydration — leading to break-up — may be the cause. This is a serious problem for which there is no meaningful solution beyond running the plant at lower rates, shutting down frequently and literally digging the clogged filters out,” he said.
PetroSA experienced the same problems with its 11000bpd gas-to-liquids plant in Mossel Bay. It took the state company two years to reconstruct the catalyst chemistry to prevent such hydration and break-up.
Parry expected the Oryx plant to run at 30% of capacity until 2009.
While the financial impact on the firm would not be that significant, he said Sasol’s entire reputation in gas-to-liquids could be at stake in a worst-case scenario.
Sasol is hailed globally as a leader in the field of developing alternative liquid energy from coal and gas. However, the delays with Oryx, its first attempt at rolling out the technology commercially, would give competitors time to catch up. It could invalidate Sasol’s pre-eminent position in the gas-to-liquids world.
“If its reputation is tarnished, it could have severe implications,” said Parry. |
