The enormous Secunda complicated of Sasol, South Africa’s largest chemical compounds and power firm, supplies the elemental substances to South Africa’s petrochemical sector. It produces petrochemicals, plastics, chemical compounds important to key industries akin to agriculture (fertilisers) and mining (explosives), and 30% of the nation’s liquid fuels. These worth chains are crucial to the financial system. In 2021, this output accounted for two.6% of GDP straight and 5.2% not directly.
Sasol additionally employs greater than 28,000 South Africans. It makes vital contributions to company taxes, wages, and social funding. It sustains a complete city constructed particularly for its Secunda workforce.
Sasol’s Secunda amenities are uncommon and fascinating. Firstly, they use coal quite than oil or gasoline as a feedstock to make petrochemicals and liquid fuels, which is uncommon. Secondly, as the most important producer of petrochemicals in South Africa, the power is vastly vital.
Nevertheless, Secunda faces two main challenges. First, its reliance on coal as the first feedstock makes it the world’s largest single level emitter of carbon dioxide emissions. Second, changing the present Secunda plant to make use of sustainable feedstocks shouldn’t be economically viable.
We’re lecturers with in depth expertise within the power sector: one with 40 years’ expertise in power and financial regulation, and the opposite as a chemical engineer for 30 years at Sasol. We labored with Tristan Hahn, a local weather change strategist who beforehand labored for Sasol for a number of years, and the Commerce and Industrial Coverage Methods assume tank to analysis the way forward for the Secunda facility.
We discovered that South Africa’s petrochemical sector is at a crossroads. In comparison with the petrochemical trade averages, the Secunda facility’s coal-based know-how ends in a a lot greater quantity of carbon dioxide emitted per ton of product.
Given the technical challenges and certain monetary impossibility of changing Secunda to sustainable feedstocks at its giant scale, even with technological developments, we concluded that the Secunda facility is coming into the sundown part of its life.
When the coal-based plant at Secunda will get to the tip of its life, it can go away a giant gap within the South African financial system and finish the availability of petrochemical feedstocks. South Africa wants to start out planning for that eventuality, which is perhaps nearer than we expect.
The issue with coal
Secunda was initially constructed within the late Nineteen Seventies to make use of coal as its main feedstock. In 2004, gasoline from Mozambique was launched as a supplementary feedstock. Our analysis evaluated the opportunity of changing Sasol’s operations to make use of inexperienced hydrogen and sustainable carbon as various feedstocks to coal and gasoline. Nevertheless, we discovered this feature to be each technically and commercially infeasible.
South Africa’s worldwide commitments to decarbonisation, together with shareholder strain, have pushed Sasol to pledge a 30% discount in its greenhouse gasoline emissions by 2030. Nevertheless, to realize this goal it has introduced an 11% lower in manufacturing. This poses challenges for the availability of chemical compounds and liquid fuels, and will negatively have an effect on employment and the financial system.
Secunda’s reliance on coal is unsustainable in different methods. Its personal coal provides have decreased and deteriorated in high quality.
Secunda has relied on pure gasoline from Mozambique as a supplementary feedstock for 20 years, however these reserves at the moment are depleting. Sasol has notified main industrial clients, akin to metal maker ArcelorMittal and Consol Glass, that it’s going to cease supplying them with gasoline in 2027. This poses a major menace to manufacturing in South Africa until viable alternate options are present in time.
With out inexpensive and sustainable feedstocks, Sasol faces the twin problem of sustaining manufacturing whereas decreasing its carbon footprint.
The South African authorities’s coverage selections on carbon taxation and environmental regulation – such because the proposed carbon tax improve to US$30/tonne of CO₂ by 2030 – might additional strain Sasol. Larger carbon taxes might tip Secunda over the sting, resulting in financial disruption and job losses.
Our analysis suggests one other means South Africa might meet its nationally decided contribution to decreasing greenhouse gasoline emissions. Prioritising renewable electrical energy and reducing emissions from Eskom’s coal-fired energy stations might permit Secunda to proceed a few of its emissions. This might assist protect the nation’s solely supply of petrochemicals.
Switching to new, inexperienced applied sciences
Sasol might additionally change to utilizing biomass, inexperienced hydrogen, and carbon seize and storage applied sciences as a substitute of coal. None of those choices are financially viable within the brief to medium time period, nonetheless. Biomass feedstocks usually are not accessible on the scale required and inexperienced hydrogen stays too costly. Carbon seize and storage applied sciences usually are not but commercially viable.
Secunda can be an ageing facility. Like all giant industrial crops, it can’t function indefinitely. When its tools wants changing, we imagine that there isn’t any business case to take action. Working this tools rigorously to the tip of its helpful life ought to be the primary precedence.
Sasol has been in monetary misery for a number of years. It’s grappling with declining shareholder worth, rising debt, and costly tasks that haven’t delivered the anticipated returns. For instance, Sasol’s Lake Charles Chemical compounds Challenge in america went means over price range. These monetary constraints make the capital-intensive investments required for decarbonisation much more daunting.
In the end, the Secunda facility will shut down. When this may occur might be partly decided by authorities regulation and leniency and partly by how Sasol manages the transition. Till then, it must discover a means by way of a number of difficulties.
Alternate options to Secunda’s petrochemicals
Our analysis recognized a number of financial improvement substitutes for South Africa.
These are: growing inexperienced hydrogen for the export of ammonia and fertiliser; manufacturing electrical autos; and growing inexperienced metal utilizing hydrogen-based direct decreased iron know-how.
Every of those is in keeping with international developments in the direction of decarbonisation. Nevertheless, these alternate options are very new. They want substantial analysis, funding and infrastructure to get off the bottom.
For that reason, our analysis requires an in depth evaluation to evaluate the feasibility and financial potential of those sectors.
Secunda, as soon as an emblem of South Africa’s industrial prowess, now faces a sundown part. On this transition, South Africa has a singular alternative to redefine its petrochemical sector. There isn’t any easy answer – policymakers should steadiness the necessity to scale back emissions with the socio-economic realities of 1000’s of jobs and billions in financial output.
For Sasol, the transition to a greener future is fraught with dangers, but additionally alternatives – if the proper investments and methods are pursued.
Rod Crompton is visiting adjunct professor and Bruce Douglas Younger is senior lecturer, each on the African Power Management Centre, College of the Witwatersrand. This text is republished from The Dialog.
Revealed – October 25, 2024 10:57 am IST
