Australia's Cimic Sues Chevron Over Gorgon LNG

New South Wales based Cimic Group has commenced legal proceedings in the US against Chevron Corporation and project manager KBR in relation to a dispute over the Gorgon LNG jetty and marine structures project.

“The commencement of the proceedings has no effect on the negotiation process or Cimic Group’s entitlement to the amounts under negotiation,” the company said in a notice filed on the Australian Stock Exchange Monday.

In 2009, Cimic was awarded the contract to build the 2.1-km long jetty along with the marine structure, which was completed in 2014. However, in February this year it issued a notice of dispute over cost blowouts.  It said during the construction the consortium working on the project (Cimic, Saipem and Saipem Portugal Comercio Maritime) was faced with changes to the project, which led to ‘change order requests’.

The Asia Excellence which delivered the first cargo from the Gorgon project to Chubu Electric (Credit: Chevron)

As per the original contract, the project was expected to cost A$900mn (US$686mn in today's money) but reportedly ended up costing more than four times more.  

The Australian construction company said the amount under negotiation is about A$1.86bn plus more than A$500mn in interest, which will continue to accrue.

Chevron Australia, a subsidiary of Chevron, is the operator of the project with 47% share. Its partners in the project are ExxonMobil and Shell, each with 25% stakes, and Japanese customers Osaka Gas (1.25%), Tokyo Gas (1%) and Chubu Electric Power (0.417%).

 Shardul Sharma