Encouraged by low-cost feedstocks from shale gas, Sasol, the South African fuels and chemicals giant, has given the final go-ahead for an ethylene cracker and derivatives complex in Lake Charles, La., that will cost $8.1 billion.
The ethylene plant will have 1.5 million metric tons of annual capacity when it opens in 2018. Sasol is also building 900,000 metric tons of polyethylene capacity, as well as plants to make ethylene oxide, ethylene glycol, Ziegler and Guerbet alcohols, and ethoxylates. An octene plant is no longer part of its plans.
Stephen Cornell, Sasol’s head of international operations, says the high price tag relative to other Gulf Coast chemical projects is primarily due to the downstream products, such as specialty alcohols, that the company will make. Some other companies are planning only ethylene and polyethylene facilities.
When the project was originally unveiled in 2011, Sasol estimated that it would cost no more than $4.5 billion. In a December 2012 update, the company raised its estimate to between $5 billion and $7 billion. Cornell fingers the “heated labor market” for the project’s escalating cost.
Russell Heinen, senior director of technology and analytics for the consulting firm IHS Chemical, says rising wages for skilled laborers, such as welders, often comes up when he talks to clients building plants. “Next year should be really interesting as we start seeing these projects reach peak staffing levels,” Heinen says. He doesn’t expect companies to cancel plans because of the higher costs, but he says he already knows of delays.
Sasol says it will make a final decision regarding a separate $14 billion gas-to-liquids plant, also planned for Lake Charles, in two years.