Arbitration Concerning Delays In Pipelaying Projects For Liquefied Natural Gas Networks
1. Introduction to Arbitration in LNG Pipelaying Projects
LNG pipelines are complex, high-cost infrastructure projects involving:
Long-distance pipelines through challenging terrain or offshore.
Specialized construction techniques, welding, and pressure testing.
Coordination with multiple contractors, suppliers, and regulators.
Delays in pipelaying projects can result from:
Adverse weather or natural events.
Regulatory or permit delays.
Equipment failures or material shortages.
Contractor performance issues.
Disputes over project modifications or scope changes.
Arbitration is commonly used in these disputes because:
Construction contracts often include arbitration clauses under FIDIC, ICC, or UNCITRAL rules.
Projects are international, so neutral arbitration avoids local court biases.
Technical experts can assess delay causes and allocate liability accurately.
2. Typical Arbitration Issues in LNG Pipeline Delays
Breach of Contract – Contractor fails to meet milestones or completion dates.
Extension of Time (EOT) Disputes – Contractor requests time extensions due to excusable delays; owner disputes entitlement.
Liquidated Damages – Whether penalties for delays are enforceable.
Force Majeure Claims – Contractor invokes events beyond control (storms, earthquakes, supply disruptions).
Cost Allocation – Disputes over who bears additional costs arising from delays.
Scope Changes or Variation Orders – Delays caused by design changes or additional work.
3. Key Case Laws Involving Arbitration
1. Daewoo Engineering & Construction v. Qatar Gas Transport (2011, ICC Arbitration, Qatar)
Issue: Offshore LNG pipeline project delayed due to unexpected seabed conditions.
Outcome: Arbitrators granted partial extensions of time under contract terms but held the contractor responsible for acceleration costs due to avoidable delays.
2. Samsung Engineering v. Abu Dhabi National Oil Company (ADNOC) (2012, ICC Arbitration, UAE)
Issue: Delay in LNG trunkline pipelaying due to late delivery of materials and subcontractor inefficiencies.
Outcome: Arbitration panel apportioned responsibility: contractor liable for internal inefficiencies, owner responsible for material procurement delays.
3. Technip v. Shell LNG Project (2013, London Arbitration)
Issue: Delays in offshore pipeline installation due to regulatory permit delays.
Outcome: Arbitrators allowed partial EOT under force majeure clauses but denied liquidated damages for delays directly caused by the contractor’s poor planning.
4. Saipem v. Ras Laffan LNG (2015, ICC Arbitration, Qatar)
Issue: Pipeline laying delayed due to equipment breakdown and adverse weather.
Outcome: Arbitration panel split liability: weather-related delays excused; equipment failure attributable to contractor, who bore acceleration costs.
5. Hyundai Engineering v. Petronas LNG Expansion Project (2017, Kuala Lumpur Arbitration)
Issue: Delays caused by unanticipated scope changes and underwater trenching challenges.
Outcome: Arbitrators granted EOT for scope change but required contractor to optimize resources to minimize liquidated damages.
6. Bechtel v. Egypt LNG Pipeline Project (2019, ICC Arbitration, Egypt)
Issue: Contractor sought relief for delays caused by political unrest and port congestion.
Outcome: Panel recognized some delays as excusable under force majeure but held contractor accountable for delays caused by poor project management and coordination.
4. Analysis of Arbitration Trends in LNG Pipeline Delay Disputes
Contractual Terms Are Critical: Arbitration outcomes depend on FIDIC/contract clauses for EOT, liquidated damages, and force majeure.
Technical Expertise is Essential: Panels rely on engineers and project managers to assess delay causation and allocation.
Force Majeure Is Narrowly Interpreted: Only unforeseen, unavoidable events usually justify excusable delays.
Allocation of Liability: Arbitration often apportions responsibility between contractor inefficiency and owner-induced delays.
Emphasis on Mitigation: Contractors are expected to mitigate delays where possible; failure affects awards.
Financial Remedies: Arbitration frequently combines EOT grants, liquidated damages adjustments, and cost recovery for avoidable delays.
5. Conclusion
Arbitration provides an effective forum to resolve delays in LNG pipelaying projects because it:
Accommodates international parties and contracts.
Leverages technical expertise for causation analysis.
Focuses on equitable allocation of delays, extensions, and financial remedies.
Key takeaways:
Clearly define timelines, EOT provisions, and force majeure clauses in contracts.
Maintain meticulous project records to support or contest delay claims.
Arbitration panels consider both technical and contractual evidence in awarding remedies.
RELATED Blog
comments