South Korean shipbuilding major Hyundai Heavy Industries (HHI) has announced that Barzan Gas, an affiliate of 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.
Barzan Gas Company has found that the Barzan Offshore Plant, completed by HHI in 2015, had a gas leak in one of its upstream pipelines and demanded at least $2.6bn for repairs.
HHI secured the contract in 2011 and the value of the contract was $860m.
HHI believes the demand is unreasonable and it will form a taskforce with related legal and technical experts to actively manage the dispute.
“The pipeline material in the upstream was judged unfit for the surrounding environment, but the company insisted on using the material anyway. Secondly, it is unreasonable to demand replacing entire pipelines of the project because of a gas leakage in only a section of it,” HHI said in a corporate disclosure.
According to HHI, the company decided to allocate KRW220.4bn ($204.2m) to repair the leak.