Sasol Commits to Mozambique, Exiting Canadian Shale
South Africa's Sasol is awaiting a signal from the Mozambican government over whether to proceed with a new gas-fired, 400 MW power plant there. It has also booked a large, but partial, impairment of its Canadian shale gas assets, ahead of a planned divestment.
Sasol described as “speculative” estimates that this will be a $1.2bn project, and sited at Temane, a location whence Sasol currently sends natural gas from its existing wells by pipe to South Africa.
At a February 26 results briefing in Johannesburg, Sasol executives provided an update of the company’s drilling programme near Temane, where it intends to complete a total of 13 wells including one water well. Sasol CFO Paul Victor said he expected the drilling would be completed around August 2018.
The company said: “In Mozambique, $285mn has already been invested on the Production Sharing Agreement (PSA) field development plan, largely comprising drilling and surface facilities. Nine wells (of the 13) have been successfully drilled and tested relating to the first phase, while drilling the first of two delineation wells relating to the second phase, is underway. Sasol anticipates oil production to be between the mid to lower-end of the range presented in the field development plan. The gas wells have confirmed that there is sufficient gas to cover initial downstream opportunities.”
Sasol and Mozambican state utility EDM have already developed a joint venture power plant in Mozambique, at Ressano Garcia (shown in the banner image, courtesy of Sasol) which is planning to expand from 175 MW to 400 MW
Sasol is currently looking at partnering the development of a further 400MW gas-powered plant, in order to commercialise the gas that will flow from its current drilling programme. Victor said this would be developed with funding from the authorities of Mozambique, who would be charged with developing infrastructure to transmit the electricity generated to less-remote areas where there would be sufficient demand, most likely with funding from multilateral lenders.
Victor said that once the current 13-well exploration exercise onshore Mozambique is completed, Sasol will move to further exploration, both onshore and offshore.
Whereas Mozambique's gas business remains core to the company, Sasol said that it is 70%-through an exhaustive review of all of its assets, expects to divest of around $1bn worth of assets, and will sell off its Canadian shale gas interests once a buyer is found.
Sasol’s earnings for July-December 2017 were rand 6.9bn ($597mn), down 20% from the rand 8.7bn in the year-ago period, “negatively impacted by the scrapping of our US gas-to-liquids project [at Lake Charles, Louisiana] amounting to rand 1.1bn ($95mn) and a partial impairment of the Canadian shale gas assets of rand 2.8bn” (US$242mn).