Price tag on Sasol’s Lake Charles complex soars by $2 billion _lowres

 

Sasol has abandoned plans for a gas-to-liquids plant in the Lake Charles area that would have cost as much as $15 billion, saying the low price of oil and a volatile marketplace make the project "uneconomic."

The plant would have converted natural gas into diesel and other refined products and accounted for the bulk of a chemical complex whose estimated price of $24 billion to $26 billion would have been the biggest industrial investment in Louisiana history. The South African company said it will focus on completing its $11.1 billion ethane cracker at the complex, which was 79 percent complete as of Sept. 30.

Sasol's gas-to-liquids plant is the second such project to be abandoned in the state within the past four years. Royal Dutch Shell plc canceled a proposed Ascension Parish plant in 2013 after its projected cost of $12.5 billion quickly ballooned to more than $20 billion.

Sasol announced plans for its complex in 2012. At the time, the price of oil averaged $94 per barrel and natural gas was around $2 per thousand cubic feet. But Sasol has been delaying a final investment decision on the GTL plans since January 2015 because of much lower oil prices. 

At the time, energy industry experts, including LSU Center for Energy Studies Executive Director David Dismukes, said the delay wasn't a surprise.

Why Sasol is delaying $14B fuel facility -- the priciest industrial investment in Louisiana history

The project's economics relied on the price difference between natural gas and crude oil, he said. The collapse of oil prices narrowed the gap so much and cut into the price of diesel that there was little chance for Sasol to recover the billions of dollars it would invest in the plant.

The proposed GTL plant would have produced more than 96,000 barrels of ultra-clean-burning diesel, naphtha and other chemical products each day. Sasol expected the facility to create 750 permanent jobs, paying an average of $88,000 a year.

Sasol Chief Financial Officer Paul Victor said the company's short-term focus in the United States is completing the ethane cracker, which breaks natural gas into smaller molecules to make ethylene. Ethylene is used to make products such as detergents, lotions, cleaners, packaging, paints and adhesives.

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