Malaysian National News Agency

Ranhill Confident Of Recovering Cost Overruns
October 28, 2005 22:50 PM
KUALA LUMPUR, Oct 28 (Bernama) -- Ranhill Bhd is confident of recovering cost overruns from its client, Petrodar Operating Company Limited, in relation to the Melut Basin Project in Sudan upon completion of the first phase of the project.

Ranhill president and chief executive officer, Tan Sri Hamdan Mohamad, said: "Being a very committed contractor, we will only submit our Variation Order when we have finished our job.

Ranhill International Inc, together with Sudan's Petroneeds Services International clinched a US$239 million Engineering, Procurement & Construction (EPC) contract for Blocks 3 & 7 located in the South East of Sudan in June 2004.

The company was said to have incurred significant cost overruns in relation to the Melut Basin Project, which was awarded by Petrodar Operating Company Limited.

"We cannot reveal the amount of additional cost neither the amount of the VO because it may jeopardise our position to get the VO from the client," he told reporters after the company's annual general meeting and extraordinary meeting here Friday.

He said the group will be seeking to recover these costs and has engaged a number of legal advisers and an international claims consultant to assist in finalising claims against Petrodar.

The claims will include the cost of schedule delays, claims for extra work, disruption costs, acceleration cost and other related miscellaneous claims.

Based on the advice of these consultants, the board of directors believe there is a high probability of success in pursuing Ranhill-Petroneeds JV claims against Petrodar, he said.

Hamdan said these claims will be submitted tomorrow.

The EPC contract awarded is for the Central Processing Facilities (CPF) at Al-Jabalyn, Field Production Facilities (FPF) at Palouge, the Operation Base Camps at both locations and 250km Produce Pipeline for transportation of produced water from CPF at Al Jabalyn to Palouge FPF via NPS12 coated line.

The processing facilities are designed to process 250,000 barrel per day of crude oil to meet export crude oil specification of 0.5 basic sediment and water.

Hamdan said the project has two milestones.

The first milestone is called the "first oil" in the tank or first oil delivery.

The purpose of the first oil is partial completion.

"We can take out the oil out quickly, while the rest of the facility which is not critical, we can take our time to build and sell the oil.

"To reach the first oil, we have to reach 85 to 90 percent overall completion level.

Today, I am pleased to announced that we have reached "first oil" in Pauloge," he said.

"We hope to be able to reach the total plant acceptance between November and December," he said.

"With that we have met the contractual requirement. And I don't see any of us loosing the performance bond as reported by the press few weeks ago," he said denying reports that the company had incurred a significant cost overrun and may lose a performance related guarantee of RM91 million it had provided for its US$239.4 million contract in Sudan.

The Field Production Facilities located at Palouge, 680km south of Khartoum, would see the erection and installation of storage tanks, first stage and second stage separators, crude oil, heaters, gas boot, booster pumps and crude oil processing equipment.

The central Processing Plant in Al Jabalyn, 480km south of Khartoum would see the erection and installation of surge vessels, storage tanks, gas boot, crude oil pre-heaters and heaters, sales oil pumps, electrostatic dehydrators, and stabilisation equipment for crude oil before exporting.

The construction of the two Operation Base Camps at both locations are on-going.


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