Name of the Project
Lake Charles Chemicals Project (LCCP).
Location
Louisiana, US.
Client
Sasol.
Project Description
The project proposes the development of a world-scale 1.5-million-ton-a-year ethane cracker and derivatives complex near Lake Charles, in the southern US state of Louisiana.
Besides the ethane cracker, the project includes six downstream chemical projects. Two large polymers plants – low-density and linear low-density polyethylene – and an ethylene oxide/ethylene glycol plant will use about two-thirds of the ethylene produced, while three smaller, higher-value derivative plants will use the balance to produce speciality alcohols, ethoxylates and other products.
Once commissioned, the petrochemicals complex will almost triple Sasol’s chemical production capacity in the US.
Jobs to be Created
Not stated.
Value
The cost of the LCCP has increased from $8.9-billion to a forecast $11-billion.
Duration
The project schedule has been extended. The ethane cracker portion of the project is expected to achieve beneficial operation in the second half of 2018, with 80% of the total LCCP expected to enter beneficial operation in 2018 and early 2019. The remaining volumes from the derivative units are expected to achieve beneficial operation by the second half of 2019.
Latest Developments
Sasol joint CEO Stephen Cornell has said that the “fundamentals” of the LCCP remain intact, despite confirmation that the project’s costs have increased to the ‘worst case’ projection of $11-billion, from an initial forecast of $8.9-billion.
Cornell tells Engineering News Online that the new estimate follows an intensive third-party review of the project, which is 50% complete, and that the figure is consistent with guidance provided by the company in June.
However, at the time, then CEO David Constable also told investors that the revised estimate was “conservative” and that the $11-billion figure was at the “upper end of the range”.
The increase represents a significant $2.1-billion increase on the estimate published at the time of the final investment decision in October 2014. In addition, the project schedule, which has been weather afflicted, has also been moved out, with 80% of the total output from LCCP reaching beneficial operation by early 2019. Sasol had initially expected the project to be completed before the end of 2018.
“Of course everybody would have been happier if [the increase] was lower, but I’m not disappointed because we were consistent in our earlier messaging that it could be this much,” Cornell has said in an interview.
He adds that the new figure includes “appropriate levels of contingency” for a project that still has to run for more than two years.
Following the cost review and adjustments to the macroeconomic and product assumptions, Sasol has also lowered its return expectations to slightly above the company’s US dollar weighted average cost of capital of 8%. Initially the project was expected to exceed the group’s hurdle rate of 10.4%.
Nevertheless, Cornell insists that the fundamental drivers – converting low-cost feedstock into higher-value chemicals – of the project remain in place.
Cornell also stresses that the funding plan has not changed as a result of the cost and schedule changes.
“This is all funded outside of South Africa, so there is no impact in terms of moving rand to the US. We have offshore funds available and the balance sheet still looks manageable. So, we don’t see any change in how we are going to fund; we don’t see any change in our dividend policy . . . so, in terms of funding, no change.”
Key Contracts and Suppliers
Fluor Corporation and Technip joint venture (engineering, procurement and construction management contract).
On Budget and on Time?
The cost of the project has increased from $8.9-billion to $11-billion.
Contact Details for Project Information
Sasol director of public affairs (US) Russell Johnson, tel +1 281 588 3027 or email media@us.sasol.com.
Sasol (South Africa) head of group media relations, Alex Anderson, tel +27 11 441 3295 or email alex.anderson@sasol.com.
Fluor Corporation media relations, Brian Mershon, tel +1 469 398 7621.
Technip public relations, Christophe Bélorgeot, tel +33 1 47 78 39 92 or email press@technip.com.