The list of contractors meeting with major difficulties on large-scale resource projects in Australia continues to grow following Downer’s withdrawal from an ammonium nitrate project in WA.
Downer has opted to withdraw from a major contract for the installation of pre-fabricated modules for a key resources project in Western Australia’s Burrup Peninsula.
The engineering giant cancelled its contract with Tecnicas Reunidas for work on the Burrup ammonium nitrate project on the grounds of what it claims was failure by the Spanish builder to remedy substantial breach of contract.
“Downer is in the process of demobilising from the site,” said the company in an official release. “Downer has not taken this decision lightly but considers it has no alternative given TR’s conduct.”
While the original value of the contract inked in March 2014 was $72 million, Downer has already been paid around $89 million, and intends to seek a further $60 million in claims via arbitration.
According to Downer the claims include costs for increases in the contract quantities, costs incurred by disruptions and delays, as well as re-working necessitated by the non-conforming free-issue models that were supplied by Tecnicas.
The ammonium nitrate plant on the Burrup Peninsula, jointly owned by Norway’s Yara International, ASX-listed Orica and and US firm Apache Corporation, is still scheduled to commence first production at the end of the year.
Downer joins a growing list of other contractors in Australia who have met with difficulties while working on major resource projects, in the wake of growing involvement in the sector by overseas investors.
In just the past year other contractors that have engaged in disputes concerning work on resource projects include Laing O’Rourke, Monadelphous Group and NRW Holdings.
Laing O’Rourke scrapped its $200 million contract with Samsung for work on the Roy Hill iron ore project, following inability to reach agreement over increased costs and delays.
Samsung also found itself in a stoush with contractor NRW over the same project, with the later launching legal action over responsibility for cost blowouts.
Contractual disputes in relation to the Wiggins Island Coal Export Terminal in Queensland have also compelled Monadelphous to file a lawsuit for the first time in the company’s 25-year history.