Sasol cuts output as motorists stay home


Sasol cuts output as motorists stay home

Published Date: 2020-04-09 | Source: Stephen Gunnion | Author: Stephen Gunnion

Sasol cuts output as motorists stay home

The group is suspending production at its Natref refinery and reducing output at Secunda as fewer motorists fill up due to the lockdown.

Sasol is suspending production at its Natref refinery due to a slump in fuel demand since the start of the national lockdown on 27 March. It took the decision with Total South Africa, its partner in the inland crude oil refinery. It will also reduce production at its Secunda Synfuels Operation by about a quarter to meet current market demand.

In an update on its response to the Covid-19 pandemic, the oil and chemicals group said a further reduction in production rates may be required depending on developments in the fuels market. As it stands, it now expects liquid fuels sales volumes to be about 50 to 51 million barrels for its 2020 financial year, down from 57 to 58 million previously. Synfuels production volumes will declined to 7.3 - 7.4 million tons, down from the 7.7 - 7.8 million tons it previously guided on.

Its mines continue to operate despite lower internal demand, while the production of chemicals continues to be prioritised. Despite the suspension of production at Natref and reduced production rates at Secunda, it said the country's current demand for fuels and chemicals - including sanitisers - would be met.

The group said it had made significant progress on a $2 billion package of measures aimed at alleviating the impact of Covid-19 and the volatile oil price.

Sasol recently warned that earnings would be impacted if the pandemic affected its production and resulted in weaker demand and pricing for its products. It said it was continuously evaluating the effect on its business, suppliers and customers and would update investors in a third-quarter performance report. In response to a plunging oil price last month, the group put hedges in place for about 80% of fourth-quarter production from its Synfuels division at around $32 per barrel. It said crude oil hedging execution would continue for the year. Although Brent crude oil has since recovered, it continues to trade below $30 a barrel.

After an initial rise, Sasol's shares closed 3.8% lower at R68.91, reversing some of this week's strong gains.

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