Energy and chemicals group Sasol is implementing several changes at its Lake Charles Chemicals Project (LCCP), in Louisiana, in the US, to ensure that the project has “a good probability” of being completed within the revised $11-billion capital cost guidance.
The group in March initiated a review of the LCCP. The review has confirmed a total capital cost for the project of about $11-billion, $2.1-billion higher than the original estimate when the final investment decision was made in October 2014.
An updated investor fact sheet on the LCCP, which comprises a 1.5-million-ton-a-year ethane cracker and six downstream chemical production facilities, shows that site and civil costs have increased by $750-million; engineering, procurement and construction management (EPCM) contactor costs by $680-million; and labour costs by $670-million.
Sasol on Tuesday said the group was now working off a $11-billion project cost as base case, as it had built in sufficient contingencies to avoid further cost overruns.
“The LCCP is an important part of Sasol’s prudent growth strategy and the substantial increase in the estimated capital cost has been an issue of concern. The detailed project review was therefore critical.
“We have taken decisive action to address the issues raised and have learned lessons for the benefit of future projects. This project still represents a world-scale chemicals facility, based on a sustainable feedstock cost advantage, and remains a value accretive pillar of our future business,” said chairperson Mandla Gantsho.
To mitigate further cost overruns and project delays, key project management changes have been made, including the deployment of three experienced Sasol project personnel to oversee the EPCM.
Sasol has made improvements to the control base management process and associated change management process; improved management of work packages to ensure first quintile productivity for the remainder of the project; and contracting strategies have been realigned to ensure that the desired level of cost and productivity is achieved.
The site and civil work is now complete and the operations are less exposed to adverse weather, which has contributed to the higher civil costs.
The overall project is about 50% complete with engineering about 85% complete, procurement of equipment is nearly 100% committed and bulk materials procurement is about two-thirds committed.
Sasol has, thus far, spent $4.8-billion on the LCCP.
The group has maintained the project schedule as communicated in June.
The first unit – the linear low-density polyethylene unit – is expected to achieve beneficial operation in the second half of calendar year 2018. This will be followed by the ethane cracker and ethylene oxide and monoethylene glycol units later that year, with the low-density polyethylene unit following shortly thereafter.
This will 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.