Major oil companies are scrambling to cut costs as global oil prices plummet. Sasol, South Africa’s petrochemicals giant, is the latest to roll out its aggressive savings plan, involving potentially thousands of job cuts.

Sasol has two goals in mind: Weather the slump in crude prices; and be well placed to take advantage of any business opportunities as soon as the market turns around.

That could come as soon as 2017 given the scale of projects that Sasol and its bigger rivals have decided to put on ice, according to Chief Executive David Constable in an interview with The Wall Street Journal. Sasol operates a number of oil and gas facilities in South Africa but has just pulled the plug on a $11 billion project on Louisiana’s Gulf Coast.

Constable reckons his plan to cut 30-50 billion rand ($2.5 billion to $4.1 billion) over the next 30 months–through mixture of job cuts, a hiring freeze, capital spending reductions and a less generous dividend—should give the group the extra financial flexibility it needs.

If crude continues to drop, “you can expect to see 50 billion rand cuts,” the top end of the targeted savings, Constable said.

“And you know we can achieve that,” as most savings have been identified and cost-cutting measures laid out, he said.

But, if oil prices pick up faster, then the cuts would stay at the lower end of the targets, around 30 billion rand, and Constable could even be shopping around for opportunities.

“If oil prices go up and we see that we can invest in a nice chemicals plant then we’ll do that,” Constable said.
For now Sasol’s labor force and shareholders, facing a 13% chop in the 2014 dividend, are bearing the brunt of the Sasol’s belt tightening.

Having cut 1,600 jobs through voluntary redundancies and early retirements, more cuts lay ahead, as well as a hiring freeze. Sasol employs around 32,400 people.

Some 300 positions have been identified to be cut by June, Constable said, and the company would then look to cut at “our monthly salaried personnel working in the plants.” “There’s quite a number of them looking at early retirement,” he added, but would not reveal the target headcount.

Having a range of targeted savings is crucial, Constable said, as that lets the company quickly respond to volatile oil prices.

Source: The Wall Street Journal