CIMIC's decision to stop work on a power plant will have a "ripple" effect on Inpex Corporation's $US37 billion Ichthys liquefied natural gas project, potentially causing delays to its forecast start-up date later this year, unions have warned.
About 400 people, including 110 electricians, laid down tools last week on the Ichthys power plant being built by a joint venture of contractors UGL and the the United States' CH2M Hill after CIMIC – which acquired UGL in a hostile takeover in December – suddenly terminated its contract with its client, JKC Australia.
Workers have been informed their employment on the power plant has ceased. UGL, which met with the union on Tuesday, has been contacting workers this week to inform them whether there are opportunities to be redeployed elsewhere on the Ichthys project site near Darwin, or whether they will have to take a redundancy.
Workers who have been making regular payments into redundancy funds are entitled to $88 for every completed week of service.
David Hayes, organiser for the Northern Territory electrical trades union, said UGL was not expected to return to complete the power station, and it could be several weeks or months before JKC found another contractor to finish it.
JKC, a consortium of Japanese engineering groups JGC and Chiyoda and US engineering group KBR, estimates work on the power plant is 89 per cent complete but workers on the project believe it will take more than a year to finish.
UGL said in November that the total costs on the $550 million power plant contract had blown out to $1.46 billion and that it would not be completed until October 2018.
CIMIC's decision to stop work was "a big blow" because the power station was at the "the heart" of the Ichthys project and would delay work on other contracts, Mr Hayes said. "The ripple effect across the project is huge."
The power station still needs to be commissioned. UGL was due to commission gas and steam turbines from the plant in the second half of calendar 2016 but previously said it could not proceed with the commissioning because JKC has been unable to provide it with suitable equipment to test.
'Considering options'
JKC said it was still assessing the situation and "considering options" to complete the power plant but wouldn't comment on how the collapse of that sub-contract would affect other work at the site at Bladin Point near Darwin.
JKC also declined to comment on the impact on costs and schedule of the work it has committed to complete for Inpex and its joint-venture partner for Ichthys LNG, French oil major Total.
But Inpex reiterated it was still targeting the September quarter this year to begin production at the project, which was 90 per cent complete as of September 2016.
While analysts have expressed doubt that the target can be reached given the work still required to complete two large pieces of offshore equipment being made in shipyards in South Korea, an Inpex spokeswoman said the construction of those two items was complete and preparations were under way to shift them to the offshore project site in the Browse Basin off the far north-west coast.
"Commissioning is in the final stages, in preparation for sail-away," the spokeswoman said.
CH2M Hill said last week that the joint venture expected to file arbitration claims, warning the arbitration process was likely "to be lengthy" and that it could not predict the outcome of disputes.
JKC declined to comment on its likely response to arbitration claims to be filed against it by the CH2M Hill/UGL joint venture.
Both CH2M Hill and JKC are clients of international legal group Hogan Lovells but it is understood the law firm is not representing either party in the Ichthys matter.
Inpex has continued to award contracts for further work as the project nears completion, including a five-year contract to Netherlands-based Fugro for repair and maintenance on sub-sea equipment and to Swift Networks for digital entertainment and communications services.
CIMIC has not terminated UGL's other Ichthys contract, a $740 million structural, mechanical and piping contract that is a joint venture with Canadian engineering group Kentz, which has also suffered delays and cost blow-outs.
