KBR resolves decade long dispute in Mexico

Engineering and construction services firm KBR has settled a years long dispute over an offshore platform construction in Mexico.

The company on Monday said it has settled its decade long dispute over an almost half billion judgment regarding the EPC construction project executed for PEMEX Exploracion y Produccion (PEP).

To remind, KBR’s subsidiary Commisa built and delivered two offshore natural gas treatment processing and reinjection platforms to Pemex, which have been working and used by Pemex since 2004, but Commisa was not fully compensated.

In December 2009, KBR received an International Chamber of Commerce (ICC) arbitration award covering the costs and fees it was owed for its work for Pemex.

The settlement announced on Monday ends KBR’s collection efforts.

Under the settlement, KBR has been paid $435 million. Moreover, all litigation between the parties is or will be dismissed.

“We are pleased by the positive resolution to this matter and glad to put this long running issue behind us,” said Stuart Bradie, President and CEO of KBR.

“KBR has had an ongoing business relationship with Pemex and PEP over many years and this settlement paves the way to broaden our productive association,” Bradie added.

Background

KBR’s subsidiary COMMISA was hired by PEP back in 1997 to build two oil platforms in the Gulf of Mexico.

According to papers from the U.S. Second Circuit Court of Appeals, difficulties arose, in part over PEP’s insistence that the platforms be fully constructed before being put into place in the Gulf of Mexico, something COMMISA considered impractical given the weight of the completed platforms.

The conflict reached climax in March 2004 when PEP, alleging that COMMISA had failed to meet contractual milestones and had abandoned the project, gave notice of its intent to administratively rescind the contract. PEP seized the platforms, which were 94 percent complete; ejected COMMISA from the work sites; and gave notice by letter of its intention to administratively rescind the contracts.

Commisa filed a demand for arbitration with the International Chamber of Commerce (ICC) in December 2004 which, in 2009, found that Pemex breached its contracts and ruled in favor of Commisa. The case was then dragged across courts in the U.S. and Mexico, but eventually, Pemex agreed to pay $300 million it owed, plus the interest.

Offshore Energy Today Staff