CIMIC sues Chevron, KBR over Gorgon dispute

CIMIC Group has launched legal action in the United States against Chevron over cost blowouts on jetty and marine structures it built at the Gorgon LNG project on Barrow Island.

In a statement today, the construction and contracting firm said it had commenced proceedings in the US against Chevron and project manager KBR in order to further pursue its entitlement.

“The commencement of the proceedings has no effect on the negotiation process or Cimic Group’s entitlement to the amounts under negotiation,” Cimic said in a statement.

Cimic issued a formal contract dispute to Chevron over a blowout on the construction of a 2.1-kilometre long jetty on the LNG project, along with marine structures, which was completed in 2014.

Cimic said that, during construction, the consortium carrying out the work (comprising Cimic, Saipem SA and Saipem Portugal Comercio Maritime) was faced with changes to the scope of work and conditions, which led to the submission of a ‘change of orders’ request.

The contract, awarded in 2009, was originally expected to cost $900 million.

Cimic previously said its share of the consortium’s total owing stood at $1.86 billion plus more than $500 million in interest, which will continue to accrue.

Cimic said today that negotiations under the contract would continue, but if they were unsuccessful, the matter could lead to arbitration.

The cost of building the jetty doubled in 2012 to $1.8 billion, three years after it was awarded to the consortium.

The bulk of the cost blowout was attributed to extra fabrication and transportation work, coupled with weather-related challenges, which requried the contractors to provide additional resources to complete the work.

The project is reported to have cost more than $4 billion at completion.

Cimic shares were 1.1 per cent higher to $30.60 each at the close of trade.