Featured Case Study: Oil & Gas
Liquefied Natural Gas Production Facility
$2-Billion, Lump Sum, Turnkey, Joint Venture EPC Contract
Following a series of delays to the construction and commissioning of a $2-billion LNG production facility, Rhodes was engaged by general counsel for the global joint venture EPC contractors. The joint venture had incurred significant cost overruns due to prolongation and acceleration of work, and – despite its efforts to mitigate delay to the owner’s commercial operation and production of LNG – faced the possibility of liquidated damages. Rhodes was engaged to assist in the assessment of project delays and disruptions, the submission of a formal request for extension of time (EOT), and the quantification of delay and acceleration related damages.
At the time of construction the project was the largest capital development in a remote and undeveloped location in Southeast Asia. The joint venture’s scope of work included the grassroots construction of a two-train LNG plant, as well as the development of extensive infrastructure: LNG storage, utility support systems, housing and administrative facilities, and marine facilities. In support of the owner’s commitment to regional growth and development and per contract requirements, the joint venture heavily utilized local labor and subcontractors, which at times presented challenges during construction.
Rhodes’ schedule analysis identified over 200 days of excusable delay as a result of the following:
- Differing site conditions
- Unanticipated tidal conditions
- Defective materials and equipment
- Changes in testing requirements
- Inexperienced plant operators
- Poor productivity of local labor
- Poor productivity of local subcontractors
- Relocation of camps and field office locations
- Permitting delays
- Changed sequencing
- Delayed shipments
- Late provision of feed gas by the owner
- Active owner interference
Based on Rhodes’ analysis of impacts and schedule delays, the joint venture submitted a formal EOT request to the owner, in addition to a request for $45 million in cost overruns. Rhodes provided support in reviewing and responding to the owner’s response to the EOT. Rhodes participated in meetings with the owner and also presented the EOT to the owner.