The first derivative unit, linear low-density polyethylene (LLDPE), produced first product in January 2019
and beneficial operation is expected in February, approximately two months behind schedule. Utilities
to support the early process units were fully operational by end November 2018. These utilities together
with LLDPE will comprise ~40% of the LCCP existing total cost.
Unfortunately, during the last quarter of CY2018, several factors within and beyond our control impacted
the completion schedule and associated cost for the remaining units resulting in the overall project
capital cost estimate being revised from US$11,13 billion to a range of US$11,6 – 11,8 billion. The
difference between the upper end and lower end of the range represents a contingency and weather
provision of US$200 million.
These factors which impacted the revised cost estimate include:
· Changes to scope
Late scope additions for the Cracker as a result of incomplete engineering work not
Increased scope to ensure process safety for the Cracker and Ethylene oxide/Ethylene
Glycol (EO/EG) unit due to defective carbon steel forgings. The impact was fully assessed
late in Q4 CY2018 leading to a one-month delay;
A cumulative month of work being lost as a result of excessive rainfall in Q4 CY2018;
· Productivity losses exacerbated by high absenteeism around public holidays and construction
rework since end November 2018; and
· Schedule delays of the remaining units will result in additional overhead costs.
While our underlying productivity factor remained on track, the inclement weather, scope additions and
absenteeism had a significant impact on actual productivity. These factors were assessed and
quantified late in Q4 CY2018 and where feasible, management interventions were put in place to arrest
the controllable trends. Unfortunately, the mitigating actions were not successful in reversing the full
impact on schedule and cost.
The beneficial operation dates for the individual units have been revised as follows:
Management maintains our unrelenting focus on delivering the remaining units per this updated plan
and we remain confident that the fundamentals for the LCCP – being, among others, a feedstock
advantaged plant, a world scale highly integrated facility, diverse product slate with high margin
products and world-class logistics and infrastructure – remain intact.
As a result of the delays highlighted above, we are revising our LCCP EBITDA estimate down from
US$110 – US$160 million to an EBITDA loss of US$165 – US$195 million for FY19. However, we
maintain our guidance that LCCP will deliver a steady state EBITDA of US$1,3 billion in FY2022.
Linear low-density polyethylene (LLDPE)
Ethylene Oxide/Ethylene Glycol (EO/EG)
Low density polyethylene (LDPE)