A time to tread carefully for Sasol
Sasol, haunted by Lake Charles, seems to have been overambitious with its investment projects
Mega-projects look great on paper when announced — but they also come with mega-risks of cost overruns and delays. For Sasol, these risks have become an all too painful reality. The source of its woes is a project under development near the city of Lake Charles in Louisiana, US. Big by global standards, the Lake Charles project is centred on an ethane cracker which will pump out ethylene at the rate of 1.5Mt/year. Also included in the project are six downstream ethylene-based chemical production facilities. Sasol pushed the start button on the Lake Charles development in October 2014, when it was then budgeted to cost US$8.9bn. Sasol’s sums were way off the mark. But it was to take until June 2016 before shareholders were given the shock news that the project would now cost $11bn, a cost overrun of $2.1bn or almost 26%. Sasol has dished out excuses ranging from higher-than-forecast contractor and labour costs ($1.35bn) and increases in site and civil engineering costs ($750m). There...
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