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Sasol’s Coal Problems Undermine Output at Secunda, US$1B Extension Gas Supply from Mozambique Until 2028

Sasol’s Coal Problems Undermine Output at Secunda, US$1B Extension Gas Supply from Mozambique Until 2028

Coal quality and mining productivity problems continue to negatively affect production at Sasol’s Secunda Operations, in Mpumalanga, where only between 6.6-million tons and 6.9-million tons will be produced this financial year.

Such output is well below both the group’s initial production guidance for the year of between 7-million and 7.2-million tons, as well as historical output levels of better than 7.5-million tons.

Production, which fell 2% in the interim period to about 3.2-million tons, was also affected by a total planned shutdown of the East factory, which reduced output by about 150 000 t during the period.

The lower volumes were offset during the six months to December 31 by higher energy prices, which enabled the JSE-listed group to sustain earnings before interest and tax at R24.2-billion, in line with the prior period.

Production at the Secunda Operations will be higher during the second half but will continue to be weighed down by the coal-related difficulties.

CEO Fleetwood Grobler reports that ensuring a recovery in the output of Secunda Operations is now a key focus area for the group, which is pursuing several initiatives to address low coal volumes and quality.

Coal remains the main feedstock to produce synthetic fuels and chemicals at Secunda Operations, which also uses some gas as a feedstock.

Grobler says a ‘full potential’ programme has been launched at its Syferfontein operation and will be extended to its other collieries over time.

In the short term, however, volumes mined internally will need to be further supplemented by third-party purchases to sustain a stockpile of sufficient size (above 1.5-million tons) to improve Secunda Operations’ security of supply and to facilitate blending to the correct quality.

Sasol is also considering “destoning” initiatives to further improve coal quality in the short term.

Various longer term feedstock options are also under review, including by opening the brownfield Alexander mine, with a final investment decision likely to be made this year.

The group is also pursuing the prospect of increasing the volume of natural gas used in Secunda’s production process, which would also support Sasol’s decarbonisation efforts.

The group has made a commitment to reduce its greenhouse gas emissions by 30% by 2030 and transition to net-zero by 2050.

Sasol is also pressing ahead with plans to displace coal-fired electricity with renewables, confirming during its interim results that it had signed power purchase agreements with independent power producers in South Africa for a total of 500 MW and was continuing with plans to secure 1 200 MW.

The renewable electricity will initially displace purchases from Eskom but will in time also enable Sasol to shut down its own coal-fired generation capacity, which will help it to reduce its yearly coal consumption.

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It was also investing to sustain gas supply from Mozambique, with CFO Hanré Rossouw telling Engineering News that it was investing some $1-billion to ensure an extension in its gas supply plateau from South Africa’s neighbour until at least 2028.

The group’s well stock in Mozambique had been expanded from 19 to 24 and Sasol was on track to add two more wells in the coming months.

Gas production from Mozambique is expected to be between 111-billion and 114-billion standard cubic feet during the current financial year. 

Mining Weekly

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