Sasol Pushes Ahead with More Costly Louisiana Chemical Complex
"A billion here, a billion there, and pretty soon you're talking real money" is a quote questionably attributed to the late U.S. Senator Everett McKinley Dirksen of Illinois. Even so, it still resonates with regard to Sasol Limited's (NYSE:SSL) (Johannesburg, South Africa) announcement on Wednesday that its Lake Charles Chemical Project (LCCP) in Louisiana may cost up to $1 billion more than previously forecast.
Sasol is definitely talking real money, with the capital cost of the project now forecasted to be between $12.6 billion and $12.9 billion, compared with its February estimate of $11.6 billion to $11.8 billion. The jump in costs "is extremely disappointing," the company said in a press release, adding, "Executive management has implemented several changes since February 2019 to further strengthen the oversight, leadership for the project and frequency of reporting."
Following the February estimate, company executives "became concerned regarding the accuracy of the project's cost forecast," and initiated a review, which revealed "significant additional concerns related to the LCCP forecasting process and a marked increase in the projected total cost."
Sasol's governing board also has commissioned an independent review by external experts, which will "cover the circumstances that may have delayed the prompt identification and reporting of the above-mentioned matters. Upon conclusion of the review, the board will take appropriate action to address the findings."
This isn't the first time the LCCP cost estimate has ratcheted up. In 2016, Sasol said the cost would be $2.1 billion more than what it anticipated two years earlier. For more information, see August 24, 2016, article - Sasol Confirms Higher Cost for Lake Charles Chemical Project.
Any sticker shock notwithstanding, work on the LCCP continues to progress, with overall project completion at 96%, according to the company.
The complex's linear low density polyethylene (LLDPE) unit achieved "beneficial operation" on February 13 and continued to ramp up in line with expectations, Sasol reported. Also, "we have achieved beneficial operation of the ethylene glycol unit (EG), with beneficial operation of the ethylene oxide unit (EO) expected in the coming days."
The LCCP's centerpiece unit, its 1.5 million-metric-ton-per-year ethane cracker, still is expected to achieve beneficial operation in July.
The remainder of the startup remains the same, Sasol said, with the exception of the Guerbet alcohol unit addition, which has been pushed back by one month to February 2020.
For more information, see Industrial Info's project reports on the ethylene unit, ethylene oxide and monoethylene glycol unit, the low-density polyethylene unit, the linear low-density polyethylene unit, the alumina unit expansion, the ethoxylation unit expansion, the Ziegler 2 alcohol unit and the Guerbet alcohol unit.
For related information, see April 11, 2019, article - TechnipFMC Involved in More Than $83 Billion in Projects; March 25, 2019, article - Polyethylene Projects Progress in Texas, Louisiana and Pennsylvania; and January 23, 2019, article - Fluor Nears Finish Line on Sasol Complex, Set to Kick Off LyondellBasell, Other Projects.