Sasol ramps up Qatar GTL
Allan Seccombe
Posted: Mon, 05 Mar 2007
miningmx.com
[miningmx.com] -- SASOL will increase output from its gas-to-liquid (GTL) facility in Qatar in an effort to boost 2008 financial year earnings, the South African petrochemical group has said. However, progress of its Nigeria GTL plant has been delayed owing to the worldwide paucity of technical staff.
“We will commission substantial new production capacity (polymers and GTL) during the year which is expected to benefit our earnings in the 2008 financial year,” said Sasol CEO Pat Davies.
Sasol will ship final product from the Qatari (Oryx) GTL project at the end of March, the company said in a statement accompanying its interim results. Sasol posted a 12% increase in operating profit of R12.2bn.
Sasol's operating profit was driven by a favourable exchange rate and a 9%increase in the Brent crude oil price, which averaged $65.60 per barrel. The profit was offset by a statutory shut down of the synthetic fuels operation in September, production interruptions and lower sales volumes.
moderate delays and increased costs
A second statutory phase shutdown for the synthetic fuels section is planned for March 2007.
The Oryx project was delayed by poor contract work, pushing back the first marketable production into the first quarter of 2007 from the end of 2006.
Global demand for engineers and construction workers on the back of strong commodity prices has put pressure on the Nigerian (Escravos) GTL project.
“These challenges have resulted in moderate delays and increased costs of certain projects, including the polypropylene and octene 3 plants in Secunda (South Africa) and the Arya Sasol plants in Iran,” the company said.
“This situation has been carefully analysed and mitigation steps aimed to secure greater owner influence on time schedules and the overall cost of ownership have been implemented,” it said.
Sasol has established offices in China and India to explore coal-to-liquid fuel (CTL) opportunities in those countries. It is conducting pre-feasibility studies in the United States, while its joint venture with Chevron is evaluating GTL prospects in Australia and Algeria.
Sasol spent R6bn on capital projects in the six-month period, of which nearly two thirds was spent in South Africa, where it has a large CTL facility providing the country with fuel.
Sasol Synfuels recorded a 14% increase in operating profit because of higher oil prices and a weaker rand. Output declined 7% as a result of the four-yearly shutdown of one half of the total plant, the start-up of the Synfuels Catalytic Cracker unit (SCC) and some production interruptions.
Sasol started its Synfuels Catalytic Cracker unit (SCC) during the period, but it was closed down for modifications after under-performing.
Operating costs at the Synfuels division increased because Sasol needed to import fuel components, as well as higher coal and natural gas costs.
The South African finance ministry nominated a task team last year to investigate a proposed windfall tax on the local liquid fuels industry because of the enormous profits it was seen to be making in the high crude oil price environment.
The task team submitted its report in February to the government outlining its proposals. The government will hear responses from the companies in the sector.
“We have conducted a preliminary study of the Task Team's report on possible reforms to the fiscal regime applicable to windfall profits in South Africa's liquid fuel energy sector, with particular reference to the synthetic fuel industry,” Davies said.
“We will respond in detail to the National Treasury of South Africa,” he added.
Sasol, which increased its interim dividend by 11% to R3.10 a share, expects lower earnings in the second half of the year because it assumes lower oil and chemical prices. |
