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Sasol supports new fuel pricing mechanism
Sasol Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1979/00323106)
Share code: SOL
ISIN code: ZAE000006896
("Sasol")
Sasol supports new fuel pricing mechanism
The Minister of Minerals and Energy, Ms Phumzile Mlambo-Ngcuka, announced that a
new fuel pricing mechanism is to replace the In-Bond Land Cost (IBLC) with
effect from 2 April 2003.
While the IBLC served as a reasonable proxy for international fuel prices for
some decades, Sasol recognizes that it lost credibility in recent years and has
been supportive of the South African government`s need to replace it with a new
formula which more accurately represents international product prices.
The new formula will be known as the Basic Fuel Price (BFP). It will represent
the true cost of alternative fuel imports into South Africa and includes
allowances for, inter alia, freight costs from refining centres to South African
ports, demurrage, wharfage, storage, financing and insurance costs.
Over the five-year period from 1997 to 2002, the new formula would have resulted
in fuel prices being about 4-5 cents per litre lower than those derived from the
IBLC formula. It is expected that in future years prices derived from the new
formula could also be up to 4-5 cents per litre lower.
As the IBLC and BFP formulas use different bases for arriving at South African
refinery gate prices, however, the new formula may at any given point in time be
lower or higher than the IBLC would have been, depending on the timing of
adjustments to the various formula components. A narrowing of the difference
between the two formulas is forecast as the surplus in international refining
capacity is reduced.
Sasol believes that this change introduces a more business-like and market-
related price. It will relate South African fuel prices to some of the most
efficient refineries in the world (ie in Singapore and the Mediterranean),
thereby ensuring that the local industry maintains its international
competitiveness.
The impact of this change on Sasol`s earnings in the current financial year
ending
30 June 2003, is expected to be minimal. In the next financial year, this change
could impact earnings by between 2 and 3%, which is significantly less than some
industry analysts and other pundits have anticipated.
Sasol cautions that rising oil prices as a result of possible conflict in the
Middle-East could overshadow any short-term reduction in fuel prices resulting
from the change to be implemented.
Johannesburg
14 February, 2003
Contact person for Sasol:
Brenda Kali
Manager: Group Communications and Public Affairs
Tel: +27 (0) 11 441 3337
Cell: +27 (0) 83 653 5959
Issued by:
Sponsor: Deutsche Securities (SA) (Proprietary) Limited
Date: 14/02/2003 12:53:00 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
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