ICC awards KBR unit $350 million against Pemex

The International Court of Arbitration of the International Chamber of Commerce has awarded KBR Inc. subsidiary Corporacion Mexicana De Mantenimiento Integral, S De RL De CV (Commisa) more than $350 million in damages, fees, expenses, and interest against Pemex Exploration & Production (PEP), a unit of Mexico’s Petroleos Mexicanos.

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Jan. 26 -- The International Court of Arbitration of the International Chamber of Commerce has awarded KBR Inc. subsidiary Corporacion Mexicana De Mantenimiento Integral, S De RL De CV (Commisa) more than $350 million in damages, fees, expenses, and interest against Pemex Exploration & Production (PEP), a unit of Mexico’s Petroleos Mexicanos.

“This arbitration closes the chapter on a significant legacy litigation issue for KBR,” said William P. Utt, KBR chairman, president, and chief executive officer.

King & Spalding LLP, representing KBR, said Commisa entered into an engineering, procurement, and construction agreement with PEP in October 1997 for construction of two large offshore platforms and ancillary structures in the Bay of Campeche for the treatment, processing, and reinjection of natural gas.

“Commisa asserted claims that PEP delayed and disrupted the construction and did not pay certain change orders,” King & Spalding said.

The base award is reported to be in the amount of $286 million. (legal and administrative recovery fees along with interest brings the total to $350 million). PEP was awarded $6 million on counterclaims, plus interest on a portion of that sum.

The court’s decision is reported to be the third recent arbitration award received by KBR subsidiaries Commisa and Combisa against PEP, all arising from works performed in the Bay of Campeche. The two prior awards are said to have been satisfied by PEP.

According to KBR, Combisa is a limited liability company registered in Mexico, which was created to build an offshore floating, production, storage, and offloading oil and gas facility in the Bay of Campeche. KBR Holdings owns a 50% interest in the company.

Analyst IHS Global Insight saw the ICC award as potentially significant for Pemex’s aim of encouraging foreign investment in the country’s oil and gas industry.

“The resolution of the legal dispute and Pemex’s respect for international arbitration proceedings will help to minimize any damage to investor confidence,” IHS Global Insight said.

“This is important,” the analyst added, “as the provision of oil services is one of the few areas of the Mexican oil sector where there are opportunities for foreign companies to participate.”

Contact Eric Watkins at hippalus@yahoo.com.

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