UGL to book more contract loss provisions on Ichthys LNG delays

June 6, 2016

Sydney-based contractor UGL on Monday informed it could face provisions of up to A$200 (approx. US$147 million) million for losses on the two contracts for the Inpex-operated Ichthys LNG project.

The company was awarded a $740 million contract for the structural, mechanical and piping (SMP) construction in a joint venture with Kentz in 2014, and a $550 million contract by JKC, the project’s EPC contractor, for the construction of a combined cycle power plant for the Ichthys LNG project, in a 50/50 JV with CH2M Hill.

According to the company statement, both projects have been impacted by client delays and disruptions.

UGL added that, if the negotiations with JKC don’t have a satisfactory result the recovery of claims would be pursued through a formal dispute. It would add to the $175 million provision already raised against the CCPP project.

UGL CEO, Ross Taylor said: “Despite substantive discussions with JKC in relation to the SMP project, we have not yet been able to achieve a satisfactory outcome in relation to the JV’s claims. This is very disappointing given the co-operation of the JV to ensure client delays to the project were, and continue to be, accommodated.”

The CCPP project will, however, reach certain milestones during through July and August 2016, but delays are expected as JKC informed it will be unable to meet its obligations in line with the current program schedule, UGL said.

The Ichthys LNG project was delayed during September last year due to an increase in the production capacity, from the initially planned 8.4 mtpa to 8.9 mtpa. The start-up date has been pushed back to the end of the first quarter 2017.

However, the company recently informed the project is currently on schedule for first production during the third quarter of 2017.

The Ichthys project is a joint venture between Japan’s Inpex, major partner Total of France, Taiwan’s CPC Corporation and the Australian subsidiaries of Tokyo Gas, Osaka Gas, Kansai Electric, Chubu Electric Power and Toho Gas.

1 AUD = 0.735653 USD

LNG World News Staff