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Qatar GTL projects face delays

Sasol CEO, Pat Davies, says the company's Qatar GTL project is delayed due to contractor problems.

South African petrochemicals group Sasol said in September that its gas to liquids (GTL) project in Qatar was likely to be between nine months and a year behind schedule due to contractor problems. In addition, all of the company’s other major projects were either behind deadline or running over budget.

The start of operations of the Oryx gas-to-liquids (GTL) plant has now been delayed to the fourth quarter of this year due to damage during early commissioning to a steam superheating plant. In September last year, Sasol said it expected the GTL plant to be onstream in the first quarter of 2006.

Chief executive Pat Davies said he was disappointed in the delay, but it would not result in significant extra costs to the project. “It’s not a train smash,” he said.

The delay resulted from damage to the steam plant and was not due to Sasol’s Fischer-Tropsch process technology, which the company uses to convert coal and gas into liquid fuels.

General manager Lean Strauss said that Oryx’s operating costs were expected to soar between 50% to 60% due to the rise in commodity prices. Davies said other Sasol projects had also been delayed or hit by cost overruns, which was a global phenomenon.

Spokesperson Johann van Rheede said: “The phenomena of commodity price increases, and engineering and construction skill shortages, is global and not limited to South Africa or Sasol.”

Davies said that an energy company, which he declined to name, had cost overruns of between 30% and 110% on capital projects.

He said the high oil price had caused an increase in investment in oil and related projects, which resulted in a skills shortage. Van Rheede said: “As a result, quality suffers, costs go up and schedules tend to move out.”

Davies said the company’s projects were being hit by a shortage of engineering service capacity and capital projects were also under strain from increases in commodities prices, especially oil.

The projects that had been hit by delays included Iran’s Arya Sasol Polymers and the synfuels catalytic cracker project, Project Turbo. Project Turbo was due to commission in September 2006 rather than the previously expected first quarter.

Another Sasol venture, The Escravos GTL, in Nigeria has been hit by a cost overrun, but this was unlikely to affect project economics. Strauss said that the cost was likely to be 20% above previous estimates.

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