South African conglomerate Sasol Ltd. plans to become a global chemicals player with the start-up of a huge new ethylene plant in Louisiana that promises to complete its conversion into a global chemicals player.
Speaking in an interview this week at Bloomberg’s Johannesburg offices, co-Chief Executive Officers Bongani Nqwababa and Steve Cornell said “The $11 billion Lake Charles project will catapult Sasol’s chemicals revenue to more than 70 percent of the company’s total once fully up and running, and the share is likely to get even bigger over time.”
In the year through June 2017, Sasol recorded revenue of 172 billion rand ($14 billion) and currently has a market value of about $23 billion.
“Once Lake Charles is fully operational, the company’s geographic revenue will be evenly split between South Africa and the rest of the world,” Nqwababa said.
The conglomerate expects $1 billion a year in revenue from the project by the time all units are producing by 2020, and about $1.3 billion the following year.
The world’s biggest producer of liquid fuel from coal projects an internal rate of return of seven percent to eight percent at Lake Charles, which will convert ethane into plastics and other products. The range is based on “conservative” ethane prices and compares with a previous estimate of about 8 percent, Bloomberg reported in 2017.
Though the group is still seeking to boost gas stations operations in its home market and increase natural gas output in Mozambigue, Cornell noted that best international growth opportunities are in specialty chemicals which are used in products from cosmetics to hardware and trends from population growth to urbanization will support strong demand for plastics and chemicals into the future, while oil-consumption growth may be limited beyond 2030.
“Our energy business is mainly Southern Africa, but our chemicals business is global,” Cornell said. “Progressively over time we’ll be more and more chemicals oriented. We’ve got a great base here in our fuels business and we’re going to continue to grow that, but globally you’ve got more opportunity on the chemicals side.”