Australia-based WorleyParsons will pay US$55 million to an ExxonMobil (XOM) subsidiary after reaching a settlement on a dispute over a $550 million contract for engineering work for an offshore drilling platform it designed.
In 2008, WorleyParsons was contracted by Exxon Neftegas, an affiliate of ExxonMobil, to provide engineering, procurement and technical support services for the Sakhalin-1 Arkutun-Dagi project's oil and gas platform off the northeastern coast of Sakhalin Island. The operations in the platform started in January 2015, producing up to 90,000 b/d.
According to a report in the Wall Street Journal, XOM charges that WorleyParsons made several mistakes in constructing the project and booked more than 2.7 million man hours, which is reportedly much more than should have been required for the design work, and that, overall, the work was over budget and behind schedule. The Journal reported that Exxon noted gaps between the platform walls and pipes that did not fit together, among other problems.
The WSJ reports that Exxon paid more than $550 million to Worley Parsons and was claiming need for a refund due to negligence. WorleyParsons countersued for unpaid work.
Currently, the full settlement amounts to $78 million and includes cash payments of $55 million. A payment of $20 million will be made this year while the remaining amount of $35 million will be paid through semi-annual payments over the next three to four years. In accordance with the terms of the settlement, WorleyParsons will withdraw its counterclaim for recovery of $23 million for work “executed in prior years but not previously invoiced or accrued.”