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Sat 21 Oct 2006 12:00 AM

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Rising construction costs hit oil and gas industries

Oryx projects in Qatar run behind after commodity hikes and skills shortages plague energy sector

South African petrochemicals group Sasol has revealed that its gas to liquids (GTL) project in Qatar will be between nine months and a year behind schedule due to contractor problems.

In addition, all of the company’s other major projects are either behind deadline or running over budget.

The start of operations of the Oryx GTL plant has now been delayed to the fourth quarter of this year due to damage to a steam superheating plant during early commissioning.

In September last year, Sasol said that it expected the GTL plant to be on stream in the first quarter of 2006.

Chief executive Pat Davies said he was disappointed with the delay, but it would not result in significant extra costs.

“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 added that other Sasol projects had also been delayed or hit by cost overruns, which was a global phenomenon.

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 has led to a skills shortage.

Spokesperson for Sasol, Johann van Rheede, said: “As a result, quality suffers, costs go up and schedules tend to move out.”

Other projects which have been hit by delays include Iran’s Arya Sasol Polymers and the synfuels catalytic cracker project, Project Turbo.

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