Johannesburg - Sasol raised its cost estimate for the Lake Charles chemical project in the US by almost 25 percent to $11 billion following a review.
The revision reflects “poorer-than-anticipated subsurface conditions”, requiring more ground works, weather delays, and higher construction and labor costs, the Johannesburg-based company said in a statement. It expects most units at the project in Louisiana to start producing in early 2019, with the remainder completed by the end of that year.
The new estimate is a blow to a company that’s seen profit eroded by lower oil prices. In June, then-Chief Executive Officer David Constable, who implemented a series of cost-saving programs at Sasol, said an increase to $11 billion was a “worst-case scenario”.
The company had forecast a cost of $8.9 billion in 2014 when it made a final investment decision.
The chemicals complex, which includes a 1.5 million-ton-a-year ethane cracker, is more than 50 percent complete, Sasol said on Tuesday.
The company’s shares fell as much as 2.8 percent to R363 in Johannesburg and traded at R367.60 as of 9.17am local time.
Constable handed over to new joint CEOs Bongani Nqwababa and Stephen Russell Cornell on July 1. He remains an adviser on some of Sasol’s largest projects.
BLOOMBERG