Shares in engineering firm UGL have tumbled after its joint venture partner flagged a $US170 million ($A200 million) cost blowout to the construction of a power station at Inpex's Ichthys LNG project in Darwin.
Shares in engineering firm UGL have tumbled after its joint venture partner flagged a $US170 million ($A200 million) cost blowout to the construction of a power station at Inpex's Ichthys LNG project in Darwin.
The cost blowout relates to a $550 million contract awarded to UGL and joint venture partner CH2M HILL for the design and construction of the project.
Separately, GE was awarded a contract to engineer and supply gas turbines, steam turbines and heat recovery steam generators for the combined cycle power plant at the $34 billion Ichthys project.
UGL said today its joint venture, which is led by US-based CH2M HILL, now expected the power station to cost a further $US170 million as a result of project changes and delays as it moved into the construction phase next year.
"UGL have been advised by CH2M Hill that as claims for the recovery of these increased costs are not yet sufficiently resolved to recognise as revenue to offset the increases, they will book a $US85 million provision in their September quarter accounts pending resolution of these issues," UGL said in a statement.
"UGL is still reviewing the cost-to-complete estimate and given ongoing discussions with the client regarding the claims position and project acceleration does not feel in a position to reliably measure the provision at this stage."
When complete, the power plant will generate electricity for Inpex's onshore facility based at Blaydin Point in Darwin, which will have the capacity to produce more than 8 million tonnes of liquefied natural gas each year.
An Inpex spokesperson said the company was confident the issues would be resolved and the overall project remained on schedule to commence production by the end of 2016.
"Inpex is confident that the issues related to cost will have no impact on overall project budget," the spokesperson said.
UGL managing director Richard Leupen said the company would work with its joint venture partner over the coming months to overcome design and procurement issues at Ichthys to resolve the claims position.
In February, a joint venture between UGL and engineering firm Kentz was awarded a $US640 million contract to perform structural, mechanical and piping works at the onshore LNG facilities at Ichthys.
Separately, Inpex said this week Ichthys had taken a major step towards completion with the integration of a lower turret with the project's floating production, storage and offloading facility.
Ichthys LNG project offshore director Claude Cahuzac said the turret was one of the most complex pieces of project equipment.
"Almost everything that will enter or leave the FPSO will do so through the turret - through chemical injection lines, transfers lines or control and power cables that provide it with fluid, gas and power from the nearby central processing facility," Mr Cahuzac said.
"The turret also provides the semi-submersible FPSO with its mooring system - with mooring lines connecting directly to the turret and not the facility - so that it can withstand cyclonic weather conditions."
Once it is completed, the facility will be towed 5,600 kilometres to the Ichthys field, where it will be permanently moored to the seabed for the life of the project.
Meanwhile, UGL also announced today it had completed the sale of its global property services business DTZ for $1.22 billion to a consortium comprising TPG Capital, PAG Asia Capital and Ontario Teacher's Pension Plan.
UGL shares closed lower at $5.89 per share.
