Sasol Petroleum International - the upstream arm of
) - recently, launched its upgraded central gas processing facility
in Temane, Mozambique. This development was backed by the growing
market demand in Mozambique and South Africa.
The unit, which was linked to the South African market through
an 537.5 miles cross-border pipeline, had natural gas production
capacity of 120 megajoules per annum (MGJ/a). This capacity has now
been expanded to 183 MGJ/a.
The expanded extra capacity of 63 MGJ/a will be distributed
among the Mozambican market (27 MGJ/a), South African market (27
MGJ/a) and Mozambican government (9 MGJ/a).
Apart from Sasol, Companhia Moçambicana de Hidrocarbonetos S.A.,
which represents the Mozambican government and the International
Finance Corporation are also partners in this project.
The companies have invested $220 million for the expansion that
was accomplished within budget and was in line with the safety
measures. Additionally, $64 million of goods and materials were
bought from Mozambican suppliers that consequently benefited the
local economy significantly.
With the discovery of natural gas in the northern part of
Mozambique along with its ample reserves of coal, many investors
have been attracted to the region. The numerous development
ventures in the country are expected not only to boost the domestic
economic scenario but also be of advantage to the entire
South Africa-based Sasol is an integrated energy and chemicals
company. It is the leading provider of liquid fuels and a major
international producer of chemicals. The group divides its
operations in these segments: South African Energy Cluster,
International Energy Cluster and Chemical Cluster.
We maintain a long-term Neutral recommendation on the stock.
Sasol currently retains a Zacks #3 Rank (short-term Hold
We believe that Sasol offers diversified energy and chemical
activities along the energy chain. The company's highly developed
technical expertise in producing synthetic fuels in commercial
quantities from low-grade coal and natural gas gives it a
competitive edge over other industry players. A robust balance
sheet and strong cash position are the other positives in the
However, we believe that the company's difficult operating
environment, characterized by a fluctuating domestic currency and
weak refining margins, will keep near-to-medium-term earnings under
pressure. Sasol also faces stiff competition from peers such as
Occidental Petroleum Corporation
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