Subcontractors Demand Payment Resolution in Thaioil Project
Thaioil confirms full payments to main contractors amid subcontractor concerns over overdue payments; urges prompt settlement by UJV – Samsung, Petrofac, and Saipem.
Reference is made to news reports by some media outlets on 21 October 2024, stating that the gathering by the Federation of Subcontractors of TOP Refinery, CFP Project, Sriracha (the “Federation”) in front of Thai Oil’s Refinery on 18 October 2024 “resulted in the Clean Fuel Project delaying the commencement of the commercial operation indefinitely” and reports on online media that Thai Oil Public Company Limited (“Thaioil”) has engaged the main contractor, i.e., the Unincorporated Joint Venture of Samsung E&A (Thailand) Co., Ltd. (“Samsung”), Petrofac South East Asia Pte. Ltd. (“Petrofac”), and Saipem Singapore Pte. Ltd. (“Saipem”) (collectively, the “UJV – Samsung, Petrofac, and Saipem”), which have severe liquidity issues to undertake the Clean Fuel Project, resulting in the issue of overdue payments to the subcontractors.
Thaioil wishes to clarify that the CFP project is an oil refinery expansion project using high technology (Complex Refinery) to enhance its competitiveness and country energy security. This is a large-scale investment requiring substantial capital expenditure. Accordingly, it is necessary for Thaioil to engage companies with specific expertise, none of which existed in Thailand. Thaioil began conducting the feasibility study of the CFP project in 2014, then the basic process design and front-end engineering design in 2015-2016 to gather sufficient information to issue an invitation to bid for contracting the Engineering, Procurement, and Construction (EPC) services for the CFP project. In 2016, Thaioil reviewed the qualifications of the bidders using transparent procurement process, in line with corporate governance principles with standard criteria, e.g., financial statements analysis, financial ratios, and experience. This resulted in 1. Petrofac International (UAE) LLC, 2. Samsung Engineering Co., Ltd., and 3. Saipem S.P.A. being selected, and they entered into an EPC contract with Thaioil in 2018 as a consortium, consisting of PSS Netherlands B.V. (Offshore Contractor) and UJV – Samsung, Petrofac, and Saipem (Onshore Contractor). The parent companies of The Consortium (PSS Netherlands B.V. (Offshore Contractor) and UJV – Samsung, Petrofac, and Saipem (Onshore Contractor)) are 1. Petrofac Limited 2. Samsung Engineering Co., Ltd., and 3. Saipem S.P.A. (the “Parent Companies”), all of whom issued parent company guarantees to secure the performance of the contractual obligations of all the Consortium Members.
Thaioil has been informed by some subcontractors in April 2024 that UJV – Samsung, Petrofac, and Saipem have not paid some subcontractors as specified under the relevant subcontracts with UJV – Samsung, Petrofac, and Saipem claiming that they were experiencing liquidity issues despite Thaioil consistently making full payments to UJV – Samsung, Petrofac, and Saipem and the Parent Companies being able to provide financial assistance to UJV – Samsung, Petrofac, and Saipem.
Thaioil would also highlight that the Federation’s gathering in front of Thaioil’s Refinery in Sriracha, Chonburi on 18 October 2024 affected Thaioil’s operations in that area, but did not cause an indefinite postponement of the Clean Fuel Project’s commencement of commercial operation as reported by some media outlets.
Thaioil confirms that it has been consistently making full and correct payments to UJV – Samsung, Petrofac, and Saipem in accordance with the EPC Contract. However, UJV – Samsung, Petrofac, and Saipem have not paid the overdue amounts to the subcontractors. Nonetheless, Thaioil is aware of the Federation’s grievances due to the non-payment by UJV – Samsung, Petrofac, and Saipem, and has consistently been urging the UJV – Samsung, Petrofac, and Saipem to settle the overdue payments with the subcontractors as per the respective subcontracts between UJV – Samsung, Petrofac, and Saipem and the subcontractors. In addition, Thaioil allowed UJV – Samsung, Petrofac, and Saipem to submit invoices for work actually completed, as opposed to work completed in accordance with agreed milestones as set out in the EPC Contract from mid-2020 to early 2024, and has been making payments as quickly as possible within the timeframe specified in the EPC Contract to support liquidity from mid-2022 to mid-2024. Moreover, Thaioil has negotiated and requested that UJV – Samsung, Petrofac, and Saipem agree to let Thaioil set-off payments payable to UJV – Samsung, Petrofac, and Saipem under the EPC Contract with amounts which Thaioil would pay directly to the subcontractors, but UJV – Samsung, Petrofac, and Saipem have not agreed. However, Thaioil must consider the fact that it is not directly contracted with the subcontractors and therefore cannot interfere with the subcontracts between the subcontractors and UJV – Samsung, Petrofac, and Saipem. Additionally, UJV – Samsung, Petrofac, and Saipem has formally notified Thaioil not to interfere with the subcontracts between UJV – Samsung, Petrofac, and Saipem and the subcontractors.
Thaioil reaffirms its commitment to conducting business with adherence to corporate governance principles and aims to complete the CFP project as soon as possible, emphasising the importance of all stakeholders. Thaioil will continue to urge UJV – Samsung, Petrofac, and Saipem to settle the overdue payments with the subcontractors as per the subcontracts between UJV – Samsung, Petrofac, and Saipem and each subcontractor.
For more information please contact:
Thai Oil Public Company Limited
www.thaioilgroup.com
https://www.facebook.com/ThaiOilPCL
Source: https://www.bangkokpost.com/thailand/pr/2890236/subcontractors-demand-payment-resolution-in-thaioil-project
