Contractor dispute stalls Uruguay LNG project

A contractual dispute has stalled a project to build an LNG import terminal in Uruguay, Uruguayan officials tell Argus.

Gas Sayago, a joint venture between Uruguay´s state-owned oil company Ancap and state-owned utility Ancap, could begin soon to levy daily fines on the contractor GNLS, comprised of France´s Engie and Japan´s Marubeni, for non-compliance. The government is now considering alternatives in the event that GNLS pulls out altogether.

"If [GNLS] withdraws or does not withdraw, our position is very clear: we demand compliance with the contract which among other things provides for consequences for non-compliance," economy minister Danilo Astori said at a conference last week. "If [GNLS] withdraws, it is evident that it is not complying with the contract it signed with Uruguay...if it goes down this path, the country will have to decide how it will face this project which is very important for Uruguay."

GNLS declined to comment.

The 10mn m³/d floating GNL del Plata project was thrown off course early this year when GNLS´ main subcontractor, Brazilian firm OAS, fell into financial straits and declared bankruptcy. OAS is among around two dozen mostly Brazilian firms implicated in a far-reaching corruption scandal centered on Brazil´s state-controlled Petrobras. OAS has denied any wrongdoing.

GNLS terminated its engineering, procurement and construction (EPC) contract with OAS on 17 March, and subsequently selected two other contractors, Dredging International, a unit of Belgium Deme, and local firm Saceem. Both were approved by Gas Sayago.

Although dredging and an onshore gas pipeline are almost complete, and a floating regasification and storage unit (FSRU) is under construction in South Korea, construction on a regasification terminal has been halted since 24 February.

"GNLS has a problem with its subcontractor. This is a problem between two private parties in which we will not intervene. Our contract remains in effect," an Uruguayan official tells Argus.

GDF Suez, now known as Engie, signed a 15-year build, own, operate and transfer contract with Gas Sayago in October 2013, and brought on Marubeni as a 50pc partner in GNLS in February 2014.

GNLS had planned to install the GDF Suez Neptune in third quarter 2015 as a bridge ahead of the start-up of the LNG receiving terminal in late 2016.

Because of limited domestic demand, the Uruguayan project is positioned to serve as a hub for supply to neighboring Argentina and Brazil, both major LNG importers.

pg/dcb

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