(Bloomberg) -- Sasol Ltd. said it will steer clear of big new investments as the world’s largest maker of fuel from coal reviews existing assets and focuses on completing its $11.13 billion U.S. chemicals plant.
Sasol won’t invest in further new gas-to-liquids or crude-oil refining capacity, according to a statement on its website ahead of an investor day being held Thursday in Johannesburg. The company won’t entertain new, wholly owned mega-projects such as the Lake Charles chemical project in Louisiana either.
“The risk profile to execute such projects alone, in the future, is larger than what Sasol wishes to undertake,” co-Chief Executive Officer Stephen Cornell said in the statement. The company’s strategy going forward will be “underpinned by increased discipline in capital allocation.”
Sasol said in August it was reviewing its assets around the world, at the same time that it lowered its estimate for returns at Lake Charles. The company announced an almost 25 percent jump in the project’s cost last year to $11 billion, which prompted it to make cuts elsewhere. It’s added a further $130 million to the budget because of costs related to Hurricane Harvey, the company said Thursday.
The company has completed reviews on more than half of its global assets and decided that most of those will be retained. However, the company intends to exit its Canadian shale-gas project and will start a structured sale process.
Between now and 2022, the company will focus on completing Lake Charles and its production-sharing agreement in Mozambique, it said.
“Beyond 2022, we will focus on building an investment portfolio of smaller to medium-sized organic and inorganic opportunities, in the range of $500 million to $1 billion,” said Chief Financial Officer Paul Victor. “This will be directed towards our growth focus areas in specialty chemicals, exploration and production and retail fuels.”
While Sasol’s gas-to-liquids operations are generating good returns and cash flows, the company won’t invest in further greenfield gas-to-liquids projects, including one it had proposed in the U.S. The “volatile external environment and structural shift to a low oil price environment” make new projects uneconomic, Cornell said.
The company won’t add new crude-refining capacity because of the large investments that would be required to meet changing fuel specifications in South Africa and a lack of any clear competitive advantage for Sasol outside its existing position in Secunda, a facility where it makes crude from coal, he said.
The initiatives will help to increase the producer’s dividend payout to 40 percent, or 2.5 times cover, by 2022, he said.
©2017 Bloomberg L.P.
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