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 Sasol is growing globally to meet increasing demand for its CTL and GTL services. At present, it is working on facilities in Qatar and Nigeria and just closed a joint venture in India. It is also in talks with governments and businesses around the world to open more facilities and start new projects. Despite rising demand for its services, Sasol’s earnings are especially sensitive to the price of oil because its process is more expensive than traditional extraction. Still, with oil prices at consistently high levels and demand for CTL/GTL technology increasing, Sasol is in prime position to lead a new trend in the global energy market.
[edit] Company Profile[edit] HistorySasol began its history as South Africa’s state energy company in the 1950s. Its original work was based on the Fischer-Tropsch process, which is way of converting natural gas and coal into liquid fuels. The process was first used by the Nazis during WWII and later adopted by the apartheid government in South Africa. [edit] Businesses and Products[edit] Energy and SynfuelsSasol’s primary business is the manufacture of synfuels—converting coal and gas to refined transportation liquids. The Synfuels division produces liquid fuel, ammonia, chemical feedsticks, sulfur, electricity, and steam. The Synfuels operation is based out of the Secunda Plant in South Africa and in 2006 produced approximately 7.54mt of products. 
Finally, Sasol is also involved in mining in South Africa. Those operations are primarily connected to the Synfuels and chemicals plants, though Sasol does export a small amount of coal (8%) internationally. [edit] ChemicalsSasol’s Chemical division manufactures polymers, solvent, olefins, and other chemicals. It has operations in South Africa, Malaysia, and China and recently invested in a new facility in Iran. The Chemical division relies on similar processes as the Synfuels—and uses some of that division’s bi-products—so their productions are complementary. [edit] Oil and GasAlthough Sasol's businesses are heavily weighted toward the production of Synfuels, the company also participates in the traditional energy sector as well. Sasol, both produces both oil and natural gas. A substantial portion of the oil and gas produced by Sasol is used by its Synfuels business. [edit] Trends and Forces[edit] Global Oil and Energy MarketsSasol’s future is fundamentally tied to developments in the broader oil and energy markets. Sasol adds value by introducing a new way to produce fuel that opens the possibility of production in countries without oil reserves. Additionally, there is a temporary production capacity shortage of transportation fuel, but Sasol’s expertise at GTL and CTL technologies opens up a new avenue of production. [edit] Oil PricesLike any energy company, Sasol’s earnings are tied to the price of oil. High oil prices have boosted Sasol’s earnings and helped fuel growth. A drop in oil prices would hit Sasol especially hard, though, because Sasol's process of making oil from coal or natural gas costs more per barrel than traditional oil extraction technologies. It costs Sasol $30-40 per barrel of oil, compared to costs as low as $10-$15 to extract oil in Saudi Arabia. As a result, Sasol's method of producing oil is profitable only when oil prices are high. [edit] Perspectives on GTL/CTLInternationally, countries are looking to CTL/GTL technology as the future of the energy sector. Especially in coal and gas-rich countries like China, India, Qatar, Iran, Nigeria, and the US, these technologies are being carefully studied and considered. Sasol already has projects or talks underway in each of these countries, so if their enthusiasm continues, Sasol is in place to take advantage of it. Beyond the countries that stand to gain financially for developing CTL technology, western countries are excited by it because it could break their reliance on unstable and unfriendly regimes for oil [edit] Currency ForcesSasol’s success is influenced by the strength of the rand. Sasol’s costs are based in rand while its revenues are dollar-based. This means that a weaker dollar/rand exchange rate would hurt Sasol’s earnings. Rand to dollar exchange rate remained relatively low throughout 2007, providing a lift for Sasol’s profits. Moreover, given South Africa's high debt per capita, it uncertain if the SA central bank will be able to prop up the rand by raising exchange rates. Doing so might have disproportionately affected the economy. [edit] Potential Stability IssuesDespite the stability of South Africa compared to some of its neighbors, Sasol is still subject to the challenges inherent in emerging markets. In South Africa, economic inequality is pushing political sentiments to the left, which has resulted in higher taxes on some corporations—including a massive windfall tax against Sasol (which is currently being appealed). Moreover, South Africa recently passed a bill declaring that coal mines were state property and could only be mined by independent companies with the permission of the state and the payment of royalties to SA. Outside of South Africa, many of Sasol’s projects have been delayed due to rising costs and inefficient project management. So, while South Africa is in many ways a more attractive economy and government than other oil-producing nations, it still poses some traditional emerging market challenges. [edit] CompetitorsSasol dominates the South African energy industry and does not face any significant local competition. In fact, it accounts for around 38% of South Africa’s fuel needs and makes up over 4% of the country’s GDP. Regardless, local competition will matter less for Sasol over the next few years as it focuses more on global initiatives for growth. Sasol is a world leader in coal-to-liquid technology and its superior technological expertise has prevented significant competition from emerging. At this point, Sasol’s primary competitors are other multinational energy companies. Its operations and revenues are dwarfed by the major energy companies, but it does not necessarily compete head-to-head with these companies because it offers such a different platform.
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