Legal battles rage over Australian gas export projects
After splurging $200bn building the world’s biggest gas export plants, producers in Australia are now locked in legal battles with contractors over who should shoulder billions of dollars in liabilities sparked by delays and cost blow-outs.
Chevron, the owner of the $54bn Gorgon gas facility, as well as Inpex and Santos, are among energy heavyweights trying to claw back funds. The number of disputes is growing weekly in a chain reaction of litigation, which extends to small businesses subcontracted to supply materials and services.
“There are billions and billions of dollars of claims out there in the market, and claims of hundreds of millions of dollars are not uncommon,” said Matthew Croagh, a partner in Melbourne with London-based law firm Norton Rose Fulbright.
After an investment bonanza at the start of the decade, many of the world’s top energy Court of Queensland in December 2016. Australia’s thirdbiggest oil and gas producer is suing US contractor Fluor for $1.1bn in damages for work on its $18.5bn GLNG facility.
DELIVERY DELAYS
Lawyers for Santos have detailed alleged delays in delivering on parts of the construction contract. They claim that Texas-based Fluor is not entitled to retain its fees.
The claims “are without merit”, Fluor said, adding that it would vigorously defend the case. Santos, based in Adelaide, declined to comment.
Other high-profile disputes include a $2.4bn legal action by Spanish-controlled engineering firm Cimic Group against Chevron and project manager KBR over a jetty project at Gorgon, which is off the state of Western Australia.
Cimic has entered arbitration over the dispute, according to its 2016 annual report, while separate US court proceedings are still ongoing.
Chevron did not publicly discuss the details of contractual dealings or litigation, a representative said. A KBR official did not immediately respond to a request for comment.
Inpex’s $37bn Ichthys liquefied natural gas project in Darwin has also been involved in legal proceedings.
ARBITRATION
UGL, owned by Cimic, may enter arbitration with a contractor over alleged delays to the completion of a power plant, according to a regulatory filing by one of its partners in the venture. Inpex said it did not comment on commercial matters.
The careful studying of contractual obligations contrasts with the fervour years earlier as companies concentrated on building giant facilities.
“Five years ago, there was so much work … there just wasn’t the focus on it,” Croagh said. “We are getting into that phase where contractors are looking much more closely at the claims potentials.”