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New report shows depth of Sasol Secunda distress
28 Oct 2024
In an in-depth report by TIPS, Sasol’s coal-to-liquids (CTL) facility in Secunda emerged as a focal point in the nation’s complex transition towards a low-emission energy landscape. The plant is the largest single-point emitter of greenhouse gases on the planet and also a major contributor to the South African economy, accounting for 1.2% of GDP directly and 2.9% if indirect impacts are included.
Sasol Secunda CTL is a cornerstone of SA's energy transition. Source: Horst Vogel/Flickr
The plant is under pressure to reduce its emissions with the authors estimating that a carbon price of R2,000 per ton of CO2 in 2030 would be required to achieve South Africa's NDC commitment.
Sasol is also facing challenges with its process feedstock because the coal that the plant uses is becoming increasingly expensive and difficult to obtain.
The plant also uses natural gas from Mozambique, but this supply is expected to decline in the coming years.
South Africa’s commitments under the Paris Agreement, along with tightening global climate regulations, require Secunda to navigate these pressures.
Sasol is also facing financial constraints with a high level of debt and constant struggles to generate cash flow.
Possible alternatives
While Sasol has explored abatement strategies, the report finds these efforts limited by economic viability concerns, technological gaps, and the reality that alternatives like green hydrogen and biomass are not yet commercially feasible for such large-scale
A proposed option would involve importing natural gas from other countries in the region and switching processes to converting crude oil into chemicals.
Authors also recommend a phased approach that considers technologies like carbon capture and storage (CCS), enhanced coal beneficiation, and using selective gas imports as transitional measures.
The report identified downstream opportunities, such as green steel production, that could position Sasol as a contributor to new, lower-emission sectors while maintaining relevance in the domestic and export markets.
Strategic policy adjustments
The authors are urging government to balance environmental commitments with industrial realities.
Adjusting policies to offer temporary relief on carbon taxes or emission allowances may provide Sasol with the needed breathing room to transition responsibly.
Aggressive carbon taxes without viable transition pathways could lead to unintended economic drawbacks, affecting jobs and regional economies dependent on Sasol’s operations.
As the nation moves toward a lower-carbon economy, Sasol Secunda should be allowed to contribute while also reducing its environmental impact.
