FIFI PETERS: We bought information from Sasol that it has declared pressure majeure at its oil refinery. And that primarily implies that South Africa’s refineries, all of them, are out. We have round six main ones, together with the Natref refinery collectively owned by Sasol and TotalEnergies SE. And that’s the place the announcement got here from.
So manufacturing on the different refineries within the nation have been suspended, for a while as a consequence of a string of different points over time. But simply to debate what Sasol’s pressure majeure means within the higher scheme of issues I’m joined by Wilhelm Hertzog – portfolio supervisor at Rozendal Partners. Wilhelm simply, taking a look at Sasol’s share worth in the present day [Monday], it might point out that this announcement wasn’t actually materials, particularly from a shareholder-, or an earnings level of view. Would you say that that’s the case?
Read: Sasol outage means all South African oil refineries are now shut
WILHELM HERTZOG: Yes. I might say that’s the case. Keep in thoughts, so Sasol produces yearly about 55 million barrels of refined product in South Africa. Of that 55 million barrels, the majority is definitely produced as its coal-to-liquid facility at Secunda.
Its 26% curiosity in Natref, efficient share of manufacturing of Natref is just about 18 million barrels of refined merchandise.
And the refining margins earned by Natref traditionally have been far decrease than that earned at Secunda. So Natref is a lower-margin operation for Sasol in South Africa and it’s additionally not as materials in phrases of measurement as its Secunda operation. So sure, a cessation of manufacturing like we experiencing at the moment for name it a month or so, is actually not too materials in phrases of the larger scheme.
FIFI PETERS: All proper. With the share worth ending up 3.5% on the JSE in the present day [Monday]. It has run up to now yr or so to round 58%. So not a giant factor for shareholders. What about for South Africans, motorists? Is this going transfer the dial in phrases of the worth that I pay for petrol on the pump?
WILHELM HERTZOG: I believe it’s unlikely. I believe each authorities and Sasol stated that they don’t count on any main disruptions to the nation’s gasoline provides general. And remember that South African petrol is already priced successfully at import parity, so we primarily already pay petrol costs equal to what it prices to import gasoline. And remember that even when South Africa’s refineries had been all up and operating, they didn’t, provide almost all of the gasoline consumed in South Africa.
So we now have already been importing a considerable share of South Africa’s gasoline demand for a few years.
So if Natref goes down for some time, which suggests it’s a must to import extra refined merchandise, sure, the refined product is pricey at the moment globally, however it’s probably not way more costly than we at the moment pay for petrol in any occasion. So it received’t damage shopper pockets or enterprise profitability too badly.
It will, of course impression South Africa’s steadiness of cost. So we should import extra larger worth objects than we might if we are solely importing undefined crude oil. So which will impression the foreign money long run, however within the quick time period, no materials impression on shopper wallets.
FIFI PETERS: And what’s the backstory once more? Why was the pressure measure declared? Sasol spoke in regards to the truth that there have been delays getting shipments of oil coming in, and I’m simply interested by what the explanations for these delays had been?
WILHELM HERTZOG: To the very best of my data the delays are merely a manifestation of the worldwide logistics points that are being skilled the world over in transport, in transportation typically. So it’s normally only a case of ships not being in the proper place on the proper time, as a consequence of varied points, starting from the hangover of Covid, to extra demand, to restrictions on exports from sure nations, Russian oil not with the ability to move within the regular commerce route that it normally did. So a complete selection of points are inflicting disruption in international commerce of amongst different issues, oil. And that’s now hitting house in South Africa.
FIFI PETERS: So the Ukraine conflict in there as properly?
WILHELM HERTZOG: Correct.
FIFI PETERS: And remind us once more, why aren’t the remainder of our refineries up and operating in South Africa proper now?
WILHELM HERTZOG: It’s a complete host of causes. So [we’ll] go from the most important to the smallest. Sapref was traditionally the most important. Sapref successfully got here to the top of its helpful life, name it late final yr. And, Sapref’s house owners determined to close it down, and within the face of having to put money into the refinery for clear fuels II too. And [as to] whether or not that funding will probably be viable … in case you choose it in business phrases, there’s a query mark round that. And then it was additionally broken within the KZN flooding – remember, Sapref is in Durban…
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Secunda is the second-largest producer of refined product in South Africa, that’s up and operating. So that’s, that’s occurring as ordinary.
[The] Engen facility in Durban was transformed to a storage terminal additionally as a result of Engen, I assume, couldn’t make the maths work in phrases of investing within the facility to stick with it and operating and to improve it for clear fuels II, which can change into obligatory in South Africa within the not too distant future.
Then Natref is the fourth largest that the subject of dialogue.
The Astron refinery in Cape Town has additionally been shut for the higher half of two years now, similar difficulty. It’s an outdated facility that had an explosion and likewise faces the prospect of having to take a position.
Glencore, which is the proprietor of the Astron facility, has the truth is come out … earlier this yr saying they are going to reopen Astron within the second half of this yr. So we’re, I assume, holding thumbs that that occurs, however at the moment it’s closed.
And then PetroSA close to Mossel Bay has run out of gasoline feedstock. So that’s why PetroSA will not be operating. So that’s actually in a nutshell, the problems dealing with all of these services. PetroSA might properly, get again up and operating sooner or later if the gasoline fields found off the coast of the Southern Cape come into manufacturing, however that’ll be a yr or two. So [there are] clouds hanging over many of them. Some clouds have a silver lining, however some have a thunderhead, I assume…
FIFI PETERS: Certainly, however as you stated, not a giant deal for shareholders of Sasol, not a giant deal for us as motorists. We are not going to be paying extra consequently of this. It may very well be problematic for our steadiness of funds additional down the observe and probably the rand, if the scenario does worsen. But Wilhelm thanks a lot for the replace and the small print. Wilhelm Hertzog is a portfolio supervisor at Rozendal Partners.