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Sasol hikes Louisiana expansion cost by up to $1.1 billion

Houston — Sasol has hiked the cost of its Lake Charles Chemicals Project in Louisiana by up to $1.1 billion amid weak internal controls and a lack of adequate oversight, the company said Wednesday.

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Sasol's latest estimate puts the cost of a new 1.5 million mt/year cracker, two new polyethylene plants with a combined capacity of 890,000 mt.year and a new 380,000 mt/year ethylene oxide/monoethylene glycol unit to $12.6 billion-$12.9 billion, the South African company said in a statement.

"This increase in the anticipated LCCP capital costs is extremely disappointing," Sasol said. "Executive management has implemented several changes since February 2019 to further strengthen the oversight, leadership for the project and frequency of reporting."

The company also Wednesday that it has reached "beneficial operation" of MEG, or 72 hours of continuous production of on-spec material, and similar beneficial operation of ethylene oxide was expected "in the coming days."

The US MEG market had expected Sasol's additional supply coming online, and export prices were last assessed May 17 down 2 cents/lb from the previous week to 23-24 cents/lb FOB USG. Sasol's startup followed Lotte Chemical's new 700,000 mt/year MEG plant in Lake Charles, started up in February, and Indorama Ventures restarted its 550,000 mt/year ethylene oxide/MEG plant in Texas three weeks ago after finishing a month-long turnaround, the plant's second lengthy stretch of maintenance this year.

Sasol said its new cracker remains on target for startup in July, followed by an August startup of a new 420,000 mt/year low density polyethylene plant . The company brought a new 470,000 mt/year linear low density polyethylene plant online in February.

As at the end of March, project completion was at 96% with construction completion at 89%, the company said.

Regarding the overall project cost hike, Sasol said its board of directors has commissioned an independent review to examine delayed identification and reporting of issues with internal controls and flawed forecasts. The board will "take appropriate action to address the findings" upon that review's conclusion, the company said.

-- Kristen Hays,

-- Edited by Richard Rubin,