Dispute with Qatari State-run Company

Qatar-based Barzan Gas Company filed for an arbitration with the International Chamber of Commerce to demand pipeline replacements that could cost more than three times the contract price.
Qatar-based Barzan Gas Company filed for an arbitration with the International Chamber of Commerce to demand pipeline replacements that could cost more than three times the contract price.

 

Hyundai Heavy Industries Co. is involved in a multi-billion dollar dispute with an affiliate of Qatari state-run oil firm Qatar Petroleum.

The company announced on March 26 that, an affiliate of Qatar’s state-owned petro company Qatar Petroleum, filed for an arbitration with the International Chamber of Commerce to demand pipeline replacements that could cost more than three times the contract price.

Hyundai Heavy Industries won the US$860 million (928.37 billion won) worth project to build and install the topside, deck house and pipelines for natural gas facilities in the sea area located northeast of the Ras Laffan Industrial City in Qatar for Barzan Gas Company in January 2011, and completed it in April 2015.

About three years later, the Qatar company requested an arbitration with the International Chamber of Commerce on March 24 to demand at least US$2.6 (billion 2.81 trillion won) for repairs. After the facilities were delivered, the Qatar company complained of defects in some sections of the pipelines so the two companies discussed over the repairs. However, Barzan Gas Company demanded full replacement with tougher ones.

An official from Hyundai Heavy Industries said, “The root cause of the defect is that Barzan Gas Company insisted on using the pipeline material that was unfit for the surrounding environment. Also, there is no legal ground in the agreement to demand replacing entire pipelines of the project because of a gas leakage in only a section of it."

“The demand is more than three times the contract price of the project. We will form a taskforce with related legal and technical experts to actively manage the dispute,” said Hyundai Heavy Industries.

Hyundai Heavy Industries decided to allocate 220.4 billion won (US$204.17 million) to repair the leak based on the company's accounting provision last year.

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