Shell's Malaysian subsidiary Sabah Shell Petroleum Company has been awarded more than $340 million in an arbitration related to the Gumusut Kakap floating production platform offshore Malaysia.
Back in late 2012, Shell signed a contract for construction and lease of the Gumusut Kakap FPS with GKL, a subsidiary of Malaysia's MISC.
In 2016, GKL filed a notice of arbitration with Asian International Arbitration Centre to start arbitration against Shell, seeking payment of outstanding additional lease rates, payment for completed variation works, and cost of arbitration.
MISC's GLK was in February 2017 awarded a US$254.45 million fee in its claim against Shell. Shell paid $73 million of outstanding increased day rates as lump-sum payments, with the balance amounts payable by Shell as increased day rates for the relevant lease period.
Shell then in June 2017 refuted GKL's claims and filed a $588 million counterclaim against GKL for defective work, the limited functionality of the Kumusut-Kakap offshore platform, liquidated damages and a refund of the full amount paid to GKL under the previous arbitration award.
The arbitration tribunal brought its ruling last week, as shared by MISC on Friday.
According to MISC, Shell was awarded $236,3 million for defects rectification works, $15 million for liquidated damages, and also an $88,3 million refund for overpayment of additional lease rates for the FPS, under the previously awarded ruling. Shell was also awarded applicable interest up to the date of the award, costs of $12,7 million and interest at 6.65% on the sums awarded in from the date of the award until payment.
Shell will be entitled to offset the amounts awarded against money owed by Shell to GKL under the contract, including but not limited to the lease rate.
The tribunal has further ruled that GKL was awarded $222,1 million, minus $88,7 million being manpower costs incurred through variation works for rectification of defects which the tribunal held GKL to be liable for.
Also, the remainder of the sum of $133,341,569.49 is converted to an additional lease rate for the offshore platform and represents a reduction from the additional lease rate awarded by under the previous ruling.
"GKL is still assessing the award and any potential material impact of the award on the earnings per share, gearing and net assets per share of MISC for the financial year ending 31 December 2020," MISC said, adding that GKL has been advised that it has legal grounds to challenge the award."
Subscribe
