Hyundai Heavy Industries (HHI) is having a hard time due to the international dispute over defect repair of marine plants. The reason is that a subsidiary of a Qatar state-run company made a claim for corrective maintenance, which is nearly 10 times the cost of construction.
HHI made an announcement on Dec. 20 that the amount of arbitration lawsuit filed by Barzan Gas Company, which is a subsidiary of Qatar's state-owned oil company, increased from $2.6 billion to $8 billion. Marine plant refers to the equipment that explores, drills and produces oil and gas buried at the bottom of the ocean.
HHI won $860 million in 2011 to manufacture and install platform top-side, residential area, and pipelines, which are marine facilities for mining natural gas in the waters of Barzan offshore, and completed them in April 2015.
However, Barzan Gas Company requested in March that the entire pipeline be replaced, saying the defects were found in some sections of the pipeline. The company filed for arbitration with the International Chamber of Commerce (ICC) arbitration agency of more than $2.6 billion for the Barzan coast project. HHI has set aside 220.4 billion won in allowance for defect repair as of the end of last year according to the company's accounting rules.
An HHI official said that there is no basis in the contract to claim a complete change of the entire section, citing defects in certain sections, and that the demand for compensation from the owner is excessive.
Noting that some analysts say that Barzan Gas Company has designated materials that are not suitable for its operating environment, and it is blamed for this problem, the official said, "We believe that much of the claim is based on weak grounds. We will actively respond through a legal and technical advisory group composed of domestic and foreign experts."