construction solutions - FTI Consulting

Critical thinking at the Critical Time TM Construction Solutions Winter 2011 ■ Issue 4FTI PROJECT PROFILEsFTI SUPPORTS OWNER IN DEFENDING DELAY CLAIMS ON OIL PRODUCTION PROJECT IN MALAYSIATHE PROJECTTalisman (Malaysia) Ltd is a Canadian-owned oil and gasexploration and production company holding a licence toproduce oil and gas from fields in the South China Sea. In 2001Talisman appointed Hyundai Heavy Engineering, a Koreancontractor, to engineer, procure, install and commission a newproduction facility designated ‘Bunga Rey A’. The work wasorganised in two separate projects: onshore construction andoffshore installation. A number of events occurred during bothprojects that resulted in delay to oil and gas production. Liabilityfor the events, and the subsequent delay, was disputed and theparties agreed to refer the matter to arbitration under LCIA rules.THE BRIEFFTI was appointed by the solicitors acting for Talisman to actas Delay Analysis expert. The brief included investigating andFTI SUPPORTS MAJOR INDUSTRIAL GAS PRODUCER IN NEW VENTURE IN CHINAreporting on the contractor’s claims for delay and constructiveacceleration in relation to the onshore project, and for delay inrelation to the offshore project. The brief also required FTI to giveevidence as an Expert Witness in the arbitration hearing.KEY ACHIEVEMENTSFollowing detailed investigations, which included meeting andinterviewing Talisman’s witnesses, a report was prepared thatconcluded delay had occurred in the onshore project, there wasno evidence to support the contractor’s claim for delay andconstructive acceleration. Our investigation found that there wasa delay, although not to the extent claimed by the contractor.The parties’ experts gave evidence and were cross examined inthe arbitration. The tribunal found in favour of the contractor,although neither to the extent claimed by the contractor nor tothat opined upon by the contractor’s expert.■THE PROJECTThe Shenua Group is China’s largest coal producer. It hasproven reserves of 223 billion tons of high quality coal, spreadover 31,200 square kilometers of Inner Mongolia. As China’senergy demands increase and oil costs continue to rise, Chinahas decided to use some of its huge coal reserves to producesynthetic fuels, employing a technique developed by Sasol forSouth Africa. Such projects require large quantities of oxygenof which Air Liquide is a world leading provider, through its AirSeparation Unit technology.THE BRIEFIn order to submit a bid for the project, Air Liquide had to form aconsortium with a Chinese EPC contractor. Air Liquide chose TCC,China Tianchen Chemical Engineering Corporation (formerly theFirst Design Institute of the Ministry of Chemical Industry, ‘FDI’).We were commissioned to draft and negotiate the consortiumagreement and also to review the Scope of Work of TCC, toensure that all risks associated with the bid to Shenua werecorrectly shared.KEY ACHIEVEMENTSFollowing the review and drafting of the Consortium Agreementin Paris, we travelled with the Air Liquide team to their offices inHang Zhou, China for final negotiations with TCC. Three days ofdirect negotiations followed, which resulted in the official signingof a consortium agreement between TCC and Air Liquide.■HAYNESVILLE PIPELINE EXPANSION PROJECT NORTHWEST LOUISIANATHE PROJECTRegency Energy Partners engaged FTI Construction Solutions toassess current systems, processes, and management tools relatedto the company’s management of $650 million worth of capitalprojects and to assist in the implementation of recommendedimprovements.KEY ACHIEVEMENTSFTI helped Regency make significant process and systemimprovements. Regency has continued to retain FTI to assist inoptimizing the organizational maturity of their projects divisionas they continue their plan for capital expansion.■THE BRIEFThe improvements that FTI recommended for the project controlsenabled Regency Energy Partners to monitor the costs andschedule in real time, so that management could be proactive toremedy situations that arose.INTERNATIONAL ARBITRATION PROCEEDINGS IN MEXICOTHE PROJECTIn 1997, the national oil company of Mexico, Petroleos Mexicanos(PEMEX) identified strategic projects to be part of a multi-billiondollar expansion of Mexico’s oil industry with the objective ofstrengthening the energy sector. The projects were to be financedby a capital investment plan hinging on the investment of privatecompanies in the form of project financing. Credits awarded byinternational banks to private firms that won contracts wereto be repaid as the projects completed and started to generaterevenue. The modernization of the Ing. Hector R. Lara SosaRefinery located in Cadereyta de Jimenez, Nuevo Leon, Mexico(Cadereyta Project) was one of the first projects to be financedprimarily by such credits. Cadereyta Refinery produces the fuelused in the northern part of the Mexican Republic, occupying anarea of approximately 5.9 square kilometers for the process units.THE BRIEFThe Cadereyta Project is unprecedented, huge-scale constructionintended to double the production of unleaded gasoline, dieseland kerosene as well as dramatically improve environmentalprotection. PEMEX awarded the Cadereyta Project toCONPROCA, an international consortium formed for thepurpose of performing the detailed engineering, procurement,construction and commissioning for the Project. The scope ofwork also included the modernization and rehabilitation ofcrude oil and processed products pipelines, pumping stations,regulation and measurement stations and the modernization offour northern area terminals. The Project required 234,440 cubicmeters of concrete foundations, 8,174 tons of steel structures,2,300 pieces of mechanical equipment weighing approximately(Continued on page 8)Fti COnsulting [ 3 ]