Sasol's Louisiana Petrochemical Project Reaches Milestone

Researched by Industrial Info Resources (Sugar Land, Texas)--Sasol Limited's (NYSE:SSL) (Johannesburg, South Africa) $11 billion Lake Charles Chemical Project (LCCP) in Louisiana has sailed past the 74% completion point and remains on track for its first units to start up in the second half of 2018, the company reported Monday. However, Sasol now expects the internal rate of return on the Lake Charles project to be 7-8%, compared with an earlier forecast of 8%, as a result of market conditions.

Capital expenditures to date on the LCCP are $7.5 billion, Sasol said in its financial results for the fiscal year ended June 30. The LLCP consists of a 1.5 million-ton-per-year ethane cracker and six downstream units, including low-density polyethylene and linear low-density polyethylene units and an ethylene oxide/ethylene glycol plant. The three downstream units will consume about two-thirds of the ethylene produced by the cracker. The other three smaller downstream units will produce specialty alcohols, ethoxylates and other products. For more information, see Industrial Info's ethylene unit project report and February 28, 2017, article - Sasol: Lake Charles Chemical Project 64% Complete.

A year ago, Sasol said the cost of the LCCP would be about $2.1 billion more than planned. For more information, see August 24, 2016, article - Sasol Confirms Higher Cost for Lake Charles Chemical Project.

Sasol cited a "backdrop of a challenging macro-economic environment" as a reason for the reduction of the internal rate of return for the LCCP. Ethane prices were factored into the revision, Sasol executives said during a conference call on Monday, according to news media reports.

"The cracker, however, remains cost competitive and is at the lower end of the cost curve for ethylene producers," the company said in its earnings release.

Sasol said it expects U.S. capital expenditures for the fiscal 2018 to be $3 billion, and $1.8 billion in fiscal 2019.

Also, the Gemini high density polyethylene project (HDPE), a 50:50 joint venture in La Porte, Texas, by Sasol and INEOS (London, England), is "essentially complete" and set to start operations in the fourth quarter this year, Sasol said. At 470,000 tons per year, the plant will be the largest bi-modal HDPE plant in the U.S., Sasol said, adding: "The market conditions continue to be favorable with low feedstock cost and strong polyethylene market demand."

The Gemini unit will be capable of producing a wide range of HDPE products, but will focus on bi-modal pipe and film resins. The project began in 2014. KBR Incorporated (NSYE:KBR) (Houston, Texas) is the project engineering, procurement and construction (EPC) contractor. For more information, see Industrial Info's project report.

Earnings attributable to shareholders for the just-ended fiscal year increased by 54% to Rand 20.4 billion ($1.55 billion) from Rand 13.2 billion ($1 billion) in the prior year, Sasol reported. However, the company said headline earnings (those without certain one-time items) fell 15%. Industrial Info is tracking more than $39 billion in global Sasol project activity.

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