Hyundai Engineering & Construction’s oil refining plant reconstruction project in Venezuela, which was won from Petróleos de Venezuela two years ago, has been halted due to the non-payment of construction costs. With the completion of the US$2.995 billion plant expected to be delayed by a year or so, Korean builders are increasingly concerned over such suspensions that could follow the economic recessions in some Latin American countries as of late.
“The facility expansion and improvement project in Puerto la Cruz has been almost halted due to non-payment since late last year,” said an industry source, adding, “PDVSA has recently given notice of a year of construction delay.”
Hyundai E&C won the project in June 2012 to renovate the facilities of the oil refining plant located 250 km to the east of Caracas. It is the first project of Hyundai E&C in the Venezuelan construction market. The company obtained the order jointly with Wison Engineering of China and Hyundai Engineering. Hyundai E&C’s share amounts to US$1.348 billion.
A delay in construction in such a large project inevitably brings about huge losses on the part of the builder because the costs snowball with the payment from the ordering body fixed. Such delays have been one of the major reasons Korean construction companies have recorded huge losses abroad for years. PDVSA is supposed to compensate for the losses but has not come up with any official stance yet.