Pieridae Mulls Suing KBR over Canadian LNG Project

Canadian LNG developer Pieridae Energy said July 13 it is considering possible legal actions after it received word from KBR that the US contractor was no longer prepared to negotiate and conclude a lump sum turnkey engineering, procurement, construction and commissioning (EPCC) contract for the 10mn mt/yr Goldboro LNG project in Nova Scotia.

KBR’s decision, Pieridae said, is an “apparent contravention” of its obligations under a services agreement signed by both parties in March 2019.

“With this notice from KBR, we are looking at all of our options, including discussing the matter with legal counsel to determine the most appropriate next steps,” Pieridae CEO Alfred Sorensen said in a statement. “There are other reputable and experienced firms who have the expertise to provide these services, with some already indicating a willingness to replace KBR.”

In June, media reported that KBR will exit most of its LNG construction and other projects. KBR’s CEO, reports said, had circulated a memo to employees stating that the company would no longer engage in “lump-sum, blue collar” construction service, noting that the Covid-19 pandemic had accelerated its decision to leave fixed-price energy projects.

KBR has said it remains interested in providing EPCC services to Goldboro, Sorensen told NGW in an email, but on a reimbursable rather than fixed-price contract basis.

“Unfortunately for us, a reimbursable contract is not financeable, thus the dispute,” he said. “We will have to replace them if we can't find a reasonable compromise.”

Pieridae said the Goldboro LNG project “remains solid”, with several key elements in place, including a 20-year contract with German utility Uniper (acquired earlier this year by Finland’s Fortum) to buy all of the output from Goldboro’s first 5mn mt/yr train and confirmation of eligibility in principle of an untied loan guarantee of up to $4.5bn from the German government.

In recent weeks, Uniper has agreed to extend certain key deadlines under its offtake agreement, including making a final investment decision on the project by June 30, 2021.

“Concurrently, Pieridae continues to take further tangible steps to advance the project as we design and plan core owner infrastructure projects such as the highway re-alignment around the LNG facility site, construction of a large-scale work camp, building key marine facilities for LNG offloading and facility site terracing,” the company said.