Sasol lowers LCCP Ebitda guidance, but says no further increases in capital cost

26th August 2019 By: Marleny Arnoldi - Creamer Media Online Writer

JSE- and NYSE-listed petrochemicals giant Sasol has resolved an issue related to a large heat exchanger on its ethane cracker at the Lake Charles Chemicals Project (LCCP), in Louisiana, in the US.

On August 16, Sasol announced that the problem had interrupted the ethane cracker operation for several days.

The company was, however, now in the process of achieving its 72-hour beneficial operation production test run on the ethane cracker.

Meanwhile, while the LCCP had, on August 24, produced the first ethylene that meets the feedstock requirements of some of the downstream units, the ethylene was marginally below polymer-grade specification, owing to the acetylene reactor system that was not performing as expected.

Sasol is upgrading the ethylene to polymer-grade specification, with support of the catalyst supplier and the technology licensor of the LCCP.

“We are currently operating the plant stably at a capacity use of about 50%, which is in line with our ramp-up plan. The ability to manage our facilities and meet our production needs in the US as an integrated site, now allows us the flexibility to consume this ethylene produced internally and to place it externally,” the company said in a statement on Monday.

However, Sasol has had to make some adjustments to the beneficial operation dates of the downstream derivative units to November for low-density polyethylene, January 2020 for Ziegler and ethoxylates and March 2020 for Guerbet.

The compares with the previously guided dates of mid-October, December and February 2020, respectively, for these units.

As a result of the technical issues and revised beneficial operation dates, Sasol has also lowered the LCCP earnings before interest, taxes, depreciation and amortisation (Ebitda) guidance for the 2020 financial year to between $150-million and $300-million, compared with the previously guided Ebitda of $300-million to $350-million.

It stressed, however, that the overall cost guidance for the LCCP remains at $12.6-billion to $12.9-billion.

“We remain confident that the incremental costs resulting from the delay can be absorbed within the existing base cost and contingency buffer,” it said.

Sasol in May revised the LCCP capital cost upward by between $1-billion and $1.3-billion to between $12.6-billion and $12.9-billion. This was a significant increase on the 2014 estimate of $8.9-billion, as well as the $11.6-billion to $11.8-billion cost estimate provided in February.