According to Reuters, the Australian contractor UGL Ltd has said that it might need to book a provision of up to AUS$200 million for losses on its work for the Ichthys LNG project, decreasing its shares by 35%.
The Ichthys LNG project is located offshore northwestern Australia, and is expected to commence production in September 2017. It is currently already six months (at least) behind the original schedule, owing to changes in the project’s scope.
This caused cost blowouts for the UGL-Kentz joint venture (JV), which is leading the construction activities for the onshore facilities, as well as claims against the JKC JV (the main contractor for the Ichthys lNG project). The JKC JV consists of JGC Corp., KBR and Chiyoda Corp.
Reuters reports that UGL has stated that these claims had not yet been settled by the company, despite the fact the company said that it, alongside its partner Kentz, had accommodated project delays. UGL also warned that it would proceed with a formal dispute if necessary.
The Chief Executive of UGL, Ross Taylor, reportedly said: “This is very disappointing given the co-operation of the JV to ensure client delays to the project were, and continue to be, accommodated.”
UGL claims that it would need to book contract loss provisions of up to AUS$200 if discussions failed and it had to proceed with a formal dispute. All of this money, or part of it, may be retrievable from JKC. This would be in addition to a provision of AUS$175 million that has been booked due to power plant delays for the project.
Edited from various sources by David Rowlands