Malaysia Marine and Heavy Engineering Holdings Bhd (MHB) has received a notice of arbitration from Kebabangan Petroleum Operating Company Sdn Bhd (KPOC) for alleged breach of contract and estimated losses of RM125.1 million.
MMHE received the notice dated March 13 via its solicitors on March 14.
The notice of arbitration is in relation to claims arising from a contract for the fabrication of Kebabangan (KBB) Topsides between KPOC and Sime Darby Engineering Sdn Bhd and a novation agreement between KPOC, Sime Darby Engineering and MMHE.
According to MHB, MMHE was responsible to carry out and complete certain works for KPOC, including to construct, engineer, procure, fabricate, inspect, test and pre-commission, load-out and sea-fastening of the KBB Topsides and associated appurtenances.
MHB said the works were completed in June 2014. Note that the KBB field is located about 135km NW of Kimanis, Sabah. The KBB platform was developed as a hub for development of deepwater oil and gas assets in the North Sabah area.
In its notice of arbitration, KPOC claims that MMHE was and is in breach of the express and/or implied terms of the contracts in respect of the supply of certain valves.
"KPOC has included an indicative amount of its alleged loss as part of the notice of arbitration, at about RM125.1 million, and has claimed that it continues to allegedly suffer losses," the company said.
It said that MMHE will vigorously defend the claims made by KPOC and is exploring its options to pursue a counterclaim against KPOC.
"Apart from the arbitration proceeding, MMHE reserves its right to pursue any other legal actions as may be permitted under the Malaysian laws, including, if appropriate, to seek indemnity from the ultimate supplier of the said valves," it added.
The financial impact of the arbitration initiated by KPOC on the group is dependent on the outcome, with expected loss, if any, of about RM125.1 million or more. However, it does not expect any operational impact to arise from the claim.