CIMIC loses $1bn Chevron claim

CIMIC Group has lost a four-year dispute against Chevron over work completed at its Gorgon natural gas project off the Western Australian coast.

The claim relates to cost blowouts on the construction of a 2.1-kilometre jetty and marine structures between 2009 and 2014.

The jetty, located at the $US54 billion Gorgon project on Barrow Island, was built by CIMIC subsidiary CPB Contractors and Italian engineering company Sapiem.

Work under the contract had increased from $900 million in 2009 to $1.85 billion in 2012.

The cost blowout was the result of extra fabrication and transportation work, along with weather-related challenges that required the contractors to provide additional resources.

Both CIMIC and Sapiem had issued a notice of dispute to Chevron in 2016.

In February this year, CIMIC said it recognised $1.13 billion in revenue from the Gorgon contract, and expected to be awarded $1.86 billion plus at least $500 million in interest.

The arbitration process has now concluded, with the Arbitral Tribunal awarding only $78 million to the consortium, which also has to pay $35 million to Chevron.

CIMIC says it will use cash from the recent sale of its mining contractor, Thiess, to cover the losses. That sale is expected to generate between $1.7 billion and $1.9 billion in cash.

CIMIC said, however, the outcome would have no impact on the company’s operational business or cash position.

Its shares closed down 0.4 per cent to trade at $22.49.