Major cost overruns at a petrochemicals and plastics project in Louisiana have led Sasol Ltd. to remove its two top executives.
Officials with Sasol in Johannesburg, South Africa, said in an Oct. 28 news release that after an extensive review of the project in Lake Charles, La., co-CEOs Bongani Nqwababa and Stephen Cornell "have agreed to an amicable mutual separation with the company," effective Oct. 31.
Chemicals Executive Vice President Fleetwood Grobler will become president and CEO of Sasol on Nov. 1. "To be clear, the board has neither identified misconduct nor incompetence on the part of the joint CEOs," officials said in the release.
In May, a company review concluded that final costs of the project — including production of polyethylene resin and ethylene feedstock — would be between $12.6 billion and $12.9 billion. Initial costs were estimated at between $5 billion and $7 billion when the project was first announced in 2012. By late 2015, that estimate already had jumped to almost $9 billion.
After the review, Sasol's board concluded that the primary responsibility for shortcomings in relation to the Louisiana project, known as the Lake Charles Chemicals Project, "lies with the former leadership of the LCCP's project management team, which engaged in conduct that was inappropriate, demonstrated a lack of competence and was not transparent."
The board also decided that "there is not sufficient evidence to conclude that these individuals acted with an intent to defraud." Officials added Oct. 28 that "some of the driving factors behind the cost and schedule increases are common in projects of the size and nature of the LCCP, but some are shortcomings that may have been avoided."
Three senior vice presidents with roles in the project already have been dismissed by Sasol. The firm also has initiated disciplinary action against the executive vice president previously in charge of the LCCP and removed him from all work responsibilities.
But officials added that further moves were needed, leading to the removal of the CEOs.
"Sadly, the LCCP challenges have tarnished the entire company, which has world-class assets and teams that have delivered a consistently strong performance," they said in the Oct. 28 release. "For trust to be restored in the company, a leadership reset is required."
Grobler will retain oversight responsibility over the final stages of the LCCP. The senior VP currently responsible for construction of the remaining units will continue to report to Grobler.
In spite of the overruns and executive changes, officials added that with the LCCP nearing completion, the board "firmly believes that this strategic project will soon start delivering significant strategic and financial benefits to our shareholders and other stakeholders and will help Sasol to gain a competitive position in a growing international chemicals market."
News of the departure of the CEOs sent Sasol's per-share stock price on the New York Stock Exchange up almost 10 percent to $20.39 in early trading Oct. 28. The price had been near $40 in mid-2018 but had fallen under $20 earlier this year.
Sasol employs more than 31,000 worldwide and has annual sales of almost $22 billion.