USA: Sasol Publishes Project Review Soaring Costs for Lake Charles Chemicals Project
Sasol announced the preliminary findings of the detailed review of the Lake Charles Chemical Project (LCCP). The review confirmed that t total capital costs for this project have increased by $ 2.1 billion.
Lake Charles/USA — The LCCP consists of a world-scale 1,5 million ton per year ethane cracker, and six downstream chemical units - two large polymers plants (low-density and linear low-density polyethylene) and an ethylene oxide/ethylene glycol plant, which together will consume around two thirds of the ethylene produced by the cracker; and three smaller, higher-value derivative plants, which will produce specialty alcohols, ethoxylates and other products. The project is under construction near Lake Charles, Louisiana in the USA, adjacent to Sasol´s existing chemical operations.
Recently a review has been completed, and involved a verification of the details and quantities of approximately 60 000 individual line items, based on actual costs, detailed engineering, benchmarking against other projects as well as actual field construction productivity factors. These factors were then combined with the updated execution strategy to prepare an updated project cost and schedule. An independent third party review of the estimate has also been carried out. The review has confirmed that the total capital cost for the project is expected to be $ 11 billion, which includes site infrastructure and utility improvements. This is an increase of $ 2,1 billion from the original estimate at the time of final investment decision (FID) in October 2014.
At 30 June 2016, the capital expenditure to date on LCCP was $4,8 billion, and the overall project completion was around 50 %. According to the company, the schedule for LCCP remains the same as communicated on 6 June 2016. The first unit, the linear low-density polyethylene unit, is expected to achieve beneficial operation in the second half of calendar year 2018, which will be followed by the ethane cracker and ethylene oxide and mono ethylene glycol units later that year, with the low-density polyethylene unit shortly thereafter. This would result in over 80 % of the total output from LCCP reaching beneficial operation by early 2019. The remaining derivative units will reach beneficial operation by the second half of 2019.
The review attributes the cost increase mainly to a significant increase in site and civil costs due to much more ground works required to what was estimated at FID as a result of poorer than anticipated subsurface conditions, bad weather and an increase in the home office and construction costs of the Engineering, Procurement, Construction and Management Contractor (EPCm) and an increase in labour costs.