Gas firms locked in legal spats as $200 billion spree sours

Bloomberg

After splurging $200 billion building the world’s biggest gas export plants, producers in Australia are now locked in legal battles with contractors over who should shoulder billions of dollars in liabilities sparked by delays and cost blow-outs.
Chevron Corp., owner of the $54 billion Gorgon facility, Australia’s largest resource development, along with Inpex Corp. and Santos Ltd. are among energy heavyweights trying to claw back funds. The number of disputes is growing weekly in a chain reaction of litigation, which extends to small businesses subcontracted to supply materials and services.
“There are billions and billions of dollars of claims out there in the market, and claims of hundreds of millions of dollars are not uncommon,” said Matthew Croagh, who handles liquefied natural gas matters as a partner in Melbourne with London-based law firm Norton Rose Fulbright. Croagh wasn’t referring to any specific dispute.
After an investment bonanza at the start of the decade — poised to catapult Australia ahead of Qatar as the world’s biggest supplier of LNG — many of the world’s top energy producers and service firms face the prospect of weaker returns. Costs of completing eight Australian projects exceeded initial forecasts by $55 billion amid competition from rival projects for equipment, labor and resources that pushed up prices and led to delays.
Now, an oil market slump means companies may have to wait years to get a return on their investments.
The scale of disputes is shown in a 138-page document filed by Santos in the Supreme Court of Queensland in December. Australia’s third-biggest oil and gas producer is suing US contractor Fluor Corp. for A$1.5 billion ($1.1 billion) in damages for work on its $18.5 billion GLNG facility in the northeastern state.

SANTOS, FLUOR
Lawyers for Santos have detailed alleged delays in delivering on parts of the construction contract, and claim that Irving, Texas-based Fluor wasn’t entitled to retain its fees.
The claims “are without merit,” Fluor said in an emailed statement, adding that it will vigorously defend the case. Santos, based in Adelaide, South Australia, declined to comment. The stock gained 0.5 percent to A$3.69 in Sydney trading as of 1:26 p.m. local time and has slipped 8.2 percent this year, compared with a 1.6 percent increase in the benchmark index.
Other high profile disputes include a $2.4 billion legal action by Spanish-controlled engineering firm Cimic Group Ltd. against Chevron and project manager KBR Inc. over a jetty project at Gorgon, off Western Australia state.