Sasol SWOT & PESTLE Analysis

Strength

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Weakness

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Opportunity

1. Upstream Exploration in Mozambique: Sasol is looking increase its upstream exploration and feedstock production through its strategic Production Sharing Agreement license (PSA) with Mozambique. The firm first commenced its drilling operation is Mozambique in May 2016. The PSA is an integrated project for LPG, gas & oil and is the nerve center of Sasol’s oil and gas strategy in Africa. Currently, Phase 1 and 2 of the PSA projects have been completed yielding 7 oil wells and 4 gas wells. The upstream project will help augment the owned hydrocarbon feedstock of Sasol and reduce its dependence on purchased feedstock in its Gas-To-Liquids (GTL) process. In addition, Sasol is evaluating options for upstream exploration and production in West Africa where it can benefit from lower costs of entry and balance sheet flexibility.

2. Strong growth rate expected in the world chemicals market: Sasol’s chemical business wing is by far its most profitable, making up over 60% of the company’s turnover. This makes Sasol particularly susceptible to trends in the global chemical market. The market outlook for specialty and base chemicals looks strong as Sasol expects the global revenue from “basic” chemicals to rise by 4.4% CAGR by 2021 (3.5% by 2030) while global revenues from “specialty chemicals” to grow by 5.6% CAGR by 2030. Basic chemicals constitute 18% of Sasol’s revenue with 3.1 million tons sold per annum worldwide. Polyethylene and polypropylene licensed technologies form the backbone of the basic chemicals business. Specialty (Performance) chemicals constitute 32% of Sasol’s revenue, with sales of over 3.5 million tons worldwide.

Threat

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Political

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Economic

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Social

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Technological

1. Digital transformation in the petrochemical industry: The oil and gas industry has not seen the most eager adoption of digital transformation, however, it can gain significantly from digitizing and digitally augmenting many of its processes for significant cost and operational advantages. For instance, the adoption of sensors backed by data analytics and AI can effectively monitor processes and equipment at drilling and extraction facilities in real time and predict outages and breakdowns reducing the cost of maintenance. Upstream resource facilities typically operate in hazardous conditions for human labor and can benefit greatly from robotics and machine learning. This could reduce the number of workers required in such facilities and significantly increase the safety standards at such facilities. Sasol is increasingly focusing on digitizing its operations in order to cut down on operational costs. The firm launched its Continuous Improvement program that uses digital technology to manage asset performance. Sasol has initiated a fund for accelerating digital adoption at all stages of its value chain while at the same time formally investing into big data. Sasol is also considering initiatives for predictive maintenance and efficiency. It is implementing drones to survey equipment across facilities and big data to improve its decision-making outcomes. Sasol is also considering Robotic Process Automation (RPA) for its standardized process which fill free up human resource for more strategic roles. Automation will also increase the firm’s ROI giving it significant competitive advantages.

2. R&D and Technological Advancement: Sasol’s advancements in the Fischer-Tropsch process of converting gasses to liquids has given it a critical advantage over even the largest of its competitors. The Gas-to-Liquids business is becoming increasingly popular worldwide due to its efficiency and cost reductions and Sasol is currently the only company to have successfully implemented the advanced Fischer-Tropsch process on a commercial scale in Qatar. Shell and Exxon Mobil, Sasol’s biggest competitors only have very small, experimental plants for the GTL process and Sasol estimates that it would be at least 4 years before they can set up a commercially viable plant. Given the expensive set-up and R&D costs, Shell is still considering going ahead with new facilities implementing this technology.

Legal

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Environmental

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