SK Engineering & Construction negotiates compensation after KNPC cancels deals
South Korea’s SK Engineering & Construction will be able to compete again for contracts tendered by Kuwait National Petroleum Company (KNPC), after the two sides finalised a compensation agreement for deals that the state refiner cancelled in 2008 and 2009.
The negotiations over compensation had prevented SK from being included on shortlists to bid on major contracts being tendered by KNPC (MEED 25:9:09).
A source close to the company says an agreement was reached with the refiner in early 2010.
“Everything has been sorted out,” he says. “SK got a little compensation, not as much as they had asked for, and they will get paid for the work they had already done on both deals.”
SK won the first deal, to build a fourth gas fractionation facility at KNPC’s Mina al-Ahmadi refinery, 45 kilometres south of Kuwait City, in December 2007. The engineering, procurement and construction deal was awarded on a lump-sum turnkey basis, where the contractor charges the client directly for all of its manpower and materials costs.
The two were meant to agree an additional fee at a later date, but a disagreement over pricing saw KNPC cancel the deal in early 2008.
The South Korean firm won a second deal, to build hydrogen processing and sulphur recovery units at KNPC’s planned Al-Zour refinery in April 2008.
However, Kuwait’s Supreme Petroleum Council cancelled all the contracts awarded on the refinery in March 2009 under intense political pressure from members of parliament who were unhappy about the way the contracts had been awarded.
KNPC has now added SK to the list of firms prequalified to bid on the retendered Mina al-Ahmadi deal. The company will also be among those allowed to bid on contracts for the Al-Zour refinery when they are retendered later in 2010, according to a source close to KNPC.
The other companies that won deals on the Al-Zour refinery have also received compensation, company sources confirm, although details of the payouts are not available.
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