CIMIC’s $2b Gorgon jetty dispute set to run and run
Contractor CIMIC Group’s $2 billion-plus claim against oil and gas giant Chevron over the Gorgon LNG project is set to drag on for at least two more years.
CIMIC’s half-year report last week said arbitrators had made orders for hearings regarding a blowout in the project’s jetty construction to be held in 2019.
It said the arbitration since December had continued in accordance with contractual terms.
CIMIC issued a notice of dispute to Chevron in February last year claiming $1.86 billion, plus $500 million in interest and costs.
The arbitration came after a period of negotiations. The Spanish-controlled company has a $1.15 billion contract debt — about 50 per cent of the total claim — recorded in its accounts in relation to the Gorgon jetty, reflecting costs incurred under accounting standards.
The 2.1km jetty at the $US54 billion Barrow Island project in the Pilbara was completed by CIMIC and Italian engineering company Saipem in 2014.
The contract’s value increased from $900 million in 2009 to an agreed figure of $1.85 billion in 2012.
CIMIC has a separate legal action in the US against Chevron and engineering company KBR, a member of the consortium which managed Gorgon’s construction.
In that lawsuit, CIMIC subsidiary CPB Contractors has accused the oil and gas giant of poor conduct and repeated refusals to pay for work it had commissioned.
It details claims of the expensive and unpaid impact of 10 cyclones, as well as environmental and safety measures. CIMIC reported a 22 per cent rise in half-year net profit to $323 million. Revenue was up 28 per cent to $6.3 billion.
The interim dividend of 60¢ a share was up 25 per cent from a year earlier.
The company reaffirmed guidance of an annual net profit for the calendar year of $640 million to $700 million, subject to market conditions.
“The compelling numbers we reported today are a testament, not only to the transformation of our business model which we commenced in 2014 but also to the ongoing drive of our people to improve, innovate and grow,” executive chairman Marcelino Fernandez Verdes said.
The 2.1km jetty at the Barrow Island project.