Sustainable development report 2007 - addressing the challenge of climate change 1/4

Challenges

	Introduction
	Promoting improved safety performance
	Addressing the challenge of climate change
	Responding to the challenge of skills development
	Encouraging black economic empowerment

addressing the challenge of climate change

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Climate change presents Sasol, and arguably the global community as a whole, with our most significant sustainability challenge. It is critical not only for our existing facilities, but also for our growth ambitions as we seek to roll-out our technologies globally.

We believe that meeting the growing global demand for energy will accelerate greenhouse gas emissions unless technological solutions and management interventions are developed and implemented. We acknowledge that a comprehensive approach to greenhouse gas management needs to be adopted for all our activities.

addressing the challenge of climate change

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We will strive to reduce our greenhouse gas (GHG) emissions in many ways, including by:

•	measuring and reporting on our global GHG emissions;
•	in the short term, introducing and optimising management interventions, including setting corporate targets for reducing GHG emissions intensity;
•	acquiring, developing and implementing energy and carbon efficient technologies and processes;
•	actively pursuing GHG mitigation-related financial instruments such as the Clean Development Mechanism as a means to accelerate a reduction in our global GHG footprint;
•	assessing the future implications of greenhouse gases in new and existing ventures;
•	developing and maintaining intelligence and partnerships in the alternative energy, carbon sequestration and other applicable emerging fields;
•	investigating opportunities to capture and store carbon dioxide as part of our planned international expansion of our coal-to-liquids (CTL) interests;
•	working with governments and regulatory authorities in the countries where we operate to achieve optimum GHG management solutions; and
•	applying sustainable development principles to all business activities.

While climate change presents a significant challenge, Sasol has an impressive record in developing and implementing innovative solutions. We believe that a combination of these alternatives and the correct investment decisions, taken together with stakeholders, will contribute measurably to ensure a sustainable future. As part of our commitment to identifying solutions in partnership with our stakeholders, this year we conducted a high-level dialogue with some leading South African climate change practitioners, with the aim of reflecting critically on the nature of these challenges for our current activities. A summary of the outcome of this dialogue is presented elsewhere in this report.

Reducing our greenhouse gas emissions

Our total global emission of methane (CH₄) and carbon dioxide (CO₂), direct and indirect, decreased from 73 million tonnes (Mt) in 2006 to 71 Mt in 2007. A breakdown of our emissions by major facility is provided in the accompanying graph. Our inventory of GHG emissions has been developed using the international recognised reporting protocol of the World Business Council for Sustainable Development and the World Resources Institute based on the management control approach. Our direct and indirect CO₂ emissions have been externally verified on the basis as outlined in the KPMG statement.

The Sasol group executive committee has recently approved our revised greenhouse gas policy statement and an environmental roadmap for the next 15 years, with a particular focus on greenhouse gases and water. We have committed to a group target of achieving at least a 10% reduction in GHG emissions per ton of product, on the 2005 baseline, by July 2015. We have prepared a detailed roadmap with milestone targets to guide us towards achieving this goal. A greenhouse gas management forum has been established to give guidance and direction to the group on these issues.

We are committed to identifying and implementing energy efficiency initiatives that will provide important benefits that are not only related to CO₂ reduction. We have committed R4 billion to improve our energy efficiency over the following years, and we anticipate that this will result in a reduction of more than 6 million tonnes of CO₂ from the baseline.

Recognising the higher GHG intensity of our coal-to-liquids facilities, we are investigating opportunities to capture and store CO₂ as part of our planned international expansion of our CTL interests. We have recently commissioned a study for a comprehensive life cycle assessment of CTL operations, accommodating CTL designs in countries such as India, China and the USA. These models will use data from feasibility studies as they become available.

In July 2007, we registered a Clean Development Mechanism (CDM) project for the reduction of nitrous oxide (N2O) emissions from our Sasol Nitro operations at Sasolburg and Secunda. It is anticipated that the project - the first of its kind in the world using secondary catalyst - will reduce N2O emissions by an amount equivalent to about one million tonnes of carbon dioxide per annum. One ton of N2O has the greenhouse impact equivalent to 310 tonnes of carbon dioxide. This technology converts N2O into nitrogen and oxygen.

Several new CDM projects are in the pipeline. Our Italian and German chemical operations have participated in the European Emission Trading Scheme in terms of EU legislation.

This year we participated in the global Carbon Disclosure Project (CDP) and we are committed to continued transparency on our performance. Internationally, we participated in a working group of the Intergovernmental Panel on Climate Change that publishes a report on carbon dioxide capture and storage.

We also participate as a South African representative on the international Carbon Sequestration Leadership Forum (CSLF). At the meetings and workshops of the annual forum, there is a valuable sharing of pilot projects amongst experts from more than 20 countries. This improves our understanding of carbon dioxide capture and storage opportunities. We are also assisting South Africa in the evaluation of, and participation in the Methane to Markets initiative.

Internationally, security of oil supply and cost concerns have led to a renewed worldwide interest in coal as an alternative source of oil-derived products. With declining oil production and reserves in some regions, alternative sources will clearly be required for the liquid fuels and chemicals derived from oil. Coal conversion technologies, particularly CTL synthesis using the world’s vast coal resources, are increasingly seen as a proven and viable means of filling that requirement. With our established world-scale CTL operation and over 50 years’ experience in this field, Sasol is well-placed to take a lead in developing CTL as one of the alternatives to traditional crude-derived routes.

Studies have shown that while our gas-to-liquids (GTL) processes, on a life cycle assessment basis, typically have a neutral to slightly positive performance on GHG emissions relative to a crude oil refining system, our CTL conversion technology has a higher GHG intensity and thus warrants particular attention.

The CO₂ emissions from such a CTL facility consist of process and utility emissions, with an approximately equal split between the two sources of emissions. Process CO₂ occurs as part of the coal conversion process and is readily available in pure form. This is different to a coal-fired power station where all the carbon is emitted in a diluted stream. Due to the concentrated nature of the process CO₂ and the relatively large quantity from a commercial size CTL facility, this CO₂ stream lends itself better to carbon capture and storage (CCS). The principle behind this is that CO₂ is stored by compressing the gas to a liquid form and injecting it into deep geological formations, such as saline aquifers, unmineable coal seams for methane production, or into older oil fields to enhance oil recovery. In some of these cases, the revenue generated by enhanced oil recovery can offset the cost of CCS.

CCS also has the added benefit that it enables the extraction of energy from coal, while also substantially lowering the carbon footprint. This leads to the “decarbonising” of coal. The science underpinning CCS is sound and is based on decades of experience in the closely allied fields of petroleum exploration and gas storage in geological structures. The remaining (and manageable) challenge is to refine the skills to model, monitor and verify the behaviour of largescale CO₂ capture and storage throughout the CCS process. Many organisations and companies have world-class capacity and experience in this area, and Sasol is committed to leverage this existing knowledge base. The Dakota Gasification Company, based in the USA, using a similar coal gasification technology as used by Sasol today, captures and sells CO₂ by pipeline for use in enhanced oil recovery across the border in Canada.

According to the International Energy Agency (http://www.iea.org), the current capture cost of CCS for power plants ranges from US$30/ton to US$90/ton CO₂, depending on the separation technology employed and the CO₂ purity in the fuel gas. A significant advantage that a CTL facility has over that of a conventional coal-fired power plant is that half of the CO₂ emitted from the CTL process is available in concentrated form. Since mainly compression of the pure process CO₂ stream is required to transport the CO₂ offsite for geological storage, a CTL facility can capture this process CO₂ at a fraction of the cost to that of a conventional coal-fired power plant.

Sasol is currently investigating the potential for geological storage in many of the areas where new CTL ventures are being considered, such as the USA, India and China. We are also investigating the sequestering of CO₂ from our local operations in South Africa. The early deployment of CCS for any of Sasol's CTL projects will depend on the following pre-conditions:

•	A good CO₂ source and sink match - a low-cost large-capacity secure geological storage site in close proximity to a proposed (or existing) CTL facility.
•	A low-capture cost for the CO₂ - this is currently achievable for the process CO₂ that is available at high concentrations.
•	Some form of offset to the combined cost of capture and storage - such as enhanced oil recovery, or some form of policy-based CO₂ mitigation incentive. In some countries the use of the Clean Development Mechanism (CDM) can assist to finance CCS, if approved.

Sasol believes that CCS should not be the only means of CO₂ mitigation for its current and future operations. Instead, we believe it is an essential part of the portfolio of solutions and initiatives necessary to achieve sustainable development objectives, while reducing the levels of CO₂ released to the atmosphere. Other solutions being studied by Sasol include increasing process efficiency and promoting renewable fuel sources such as biomass gasification.

We have reviewed Sasol's environmental roadmap with a particular focus on updating our GHG reduction activities. As part of this commitment, the potential role of renewable energy is again under investigation. We are conducting initial studies on biodiesel and biomass gasification to better understand the economic, social and environmental opportunities and challenges associated with increased use of renewable energy in a carbon constrained future. We recognise the need for government involvement and appropriate policy instruments to encourage greater use of renewables in South Africa and we are contributing to this effort through our participation in the development of a national renewables policy.

"Our future economic performance is partly dependent on CTL production capacity growth. We really have to spend more time, money and energy in developing cost-effective solutions to reduce the environmental impact of CTL plants. This is a tough business challenge, but also a huge business opportunity."

Sasol employee

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