A billion here and a billion there: how Sasol came to sell 50% of its Lake Charles megaproject
- Sasol has been working on a chemical project in Louisiana for a decade.
- Estimates for its final cost now stand at $13 billion, the equivalent of R214 billion.
- That's up by nearly half – before it made a "worst case" prediction of $11 billion in 2016.
- On Friday, Sasol announced a plan to sell half of its shareholding in key Lake Charles assets to LyondellBasell Industries to help with its debt.
- Here's a timeline of how Sasol came to offer the assets for sale.
- For more stories go to www.BusinessInsider.co.za.
It started, a decade ago, with a plan to make hexane from ethylene. Then it grew more complex, more complicated and – ultimately – more than Sasol could handle on its own.
On Friday Sasol announced it would sell 50% of key Lake Charles assets to LyondellBasell Industries.
Here is how Sasol's Lake Charles project developed, over a decade, from a first-of-its-kind plant to a mega-complex – and into a debt millstone around its neck.
Sasol’s board announces plans to build a new unit at the Lake Charles Chemical Complex in Westlake, Louisiana. The unit will use a first-of-a-kind technology designed by Sasol engineers to produce hexane from ethylene, it says.
In May 2011, Sasol announces the appointment of David Constable as CEO to replace Pat Davies. At the time Constable was Group President of Operations at Fluor Corporation where he had worked for almost 30 years.
In September 2011, Sasol’s managing director for new business development, Ernest Oberholster and Louisiana Governor Bobby Jindal visit the Lake Charles Chemical complex and jointly announce that Sasol has approved an 18-month feasibility study for a gas-to-liquids plant, which is expected to begin operating in 2017.
By November of that year Sasol begins construction of the world’s first tetramerisation unit to produce monomers at Lake Charles, which it expects to be operational in 2014. Sasol also says it will begin studying the construction of a giant ethane cracker in the same area.
By September 2012 Sasol says feasibility studies for the gas-to-liquids and chemicals plant, as well as the ethane cracker and ethylene derivatives plant, are in progress, and will be completed by the end of the year.
In December 2012 Sasol says its board granted approval to proceed to front-end engineering and design phase for the facilities. The combined cost is estimated at more than $14 billion.
In October 2014 Sasol says it has approval for the construction of the ethane cracker and chemical plant, at $8.9 billion. The contract for the engineering, procurement and construction management of the ethane cracker and derivatives plant is awarded to a joint venture between Technip and Fluor, CEO David Constable’s former employer.
Sasol also says that should the gas-to-liquids plant also proceed, the total cost of the combined project will climb to $22 billion, touted as the biggest industrial undertaking in Louisiana’s history. Sasol says it will make a decision on the gas-to-liquids project within two years.
In January 2015 Sasol says it will delay its decision on the gas-to-liquids plant, which by now is estimated will cost an additional $14 billion over and above the $8.9 billion earmarked for the ethane cracker and chemical plant, due to a collapse in oil prices.
In March 2015 Sasol announces plans to cut 1,500 jobs across all its operations, although the majority would be in South Africa, in an effort to preserve cash in the midst of plunging oil prices.
In June 2015 Sasol announces that President and CEO David Constable will not renew his contract with the company, due to expire on 31 May 2016.
By December 2015 Sasol announces that Constable will be replaced by Bongani Nqwababa and Stephen Cornell.
Sasol announces in March 2016 that some units at its ethane cracker plant would only open in the second half of 2019, a year later than originally planned, due to the impact of lower oil prices on its finances. CEO Constable says a review of the facility’s costs is being conducted, and would be completed by the end of the year.
By August 2016 Sasol says it had raised its cost estimate to a “worst case” $11 billion, up a quarter from the $8.9 billion shareholders had originally expected.
In November 2017 Sasol abandons plans to build a gas-to-liquids plant at Lake Charles, which would have cost as much as $15 billion, as the lower than anticipated cost of oil has rendered the project non-viable. Instead it says it will focus on finishing its ethane cracker and chemical plant – which was now expected to cost $11.1 billion.
By February 2019 Sasol says the Lake Charles Chemical Plant project will now cost $11.8 billion.
In May 2019 Sasol reveals that the cost will, in fact, rise to $12.9 billion.
On 16 August 2019 Sasol shares plunge 16% after the company says it will delay publishing its annual financial results, which had been due on 19 August, to allow it to complete an in-depth investigation of Lake Charles.
By early September 2019 Sasol delays its results for a second time, to no later than 31 October 2019, saying it needs more time to complete its investigation.
On 28 October 2019 Sasol announces that joint CEOs Bongani Nqwababa and Stephen Cornell will leave the company by the end of the month following a review that found serious mismanagement related to the rising cost at Lake Charles. They are replaced by Fleetwood Grobler, an executive vice president for chemicals.
Sasol’s share price almost halves in early March 2020 due to a plunge in oil prices following Saudi Arabia’s decision to escalate an oil price war with Russia.
In August 2020 Sasol reports a full-year loss of R91.3 billion and says it suffered R112 billion in asset writedowns related to Lake Charles.
In October 2020 Sasol announces a plan to sell a $2 billion stake to LyondellBasell Industries to help with its debt – making it a 50% shareholder in the three key Lake Charles units, the project's ethane cracker as well as two polyethylene plants,.
Lake Charles now has an estimated cost of $13 billion.
* This article has been updated to reflect that LyondellBasell is buying a 50% stake in the three key Lake Charles units.
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