Kvaerner dismisses corruption claims

Image: Kvaerner
Image: Kvaerner

Following recent reports of Kvaerner’s involvement in a major international oil industry corruption scandal including Monaco-based company Unaoil, the Norwegian company has denied the allegations. 

In a statement on Tuesday, Kvaerner said: “Media has brought forward allegations about Unaoil’s business practices as a supplier to a number of companies, including Aker Kvaerner. Kvaerner believes that its project execution in the Caspian Sea was conducted properly and within the relevant frameworks for good integrity.”

After the Huffington Post and its Australian partner, Fairfax Media, last week revealed results of a six-month investigation of Unaoil, a number of oil companies, including Kvaerner, were implicated in a global web of bribery that spanned across Middle East and Africa.

When Kvaerner’s predecessor, Aker Kvaerner, decided to engage in the Caspian region, there was a high level of awareness that this region could be demanding to operate in therefore, Aker Kvaerner hired Unaoil in 2007 in order ti help with project implementation in the Caspian region, including the Kashagan project.

“The information from the various reviews gave no reason to believe that Unaoil did not operate according to relevant regulations and recognised integrity standards,” Kvaerner said in a statement on Tuesday.

In connection with using Unaoil as a service provider, Kvaerner said the company’s integrity was certified by Trace International and audited by PwC. Unaoil was also recommended by other international companies who had utilized their services and thus assessed Unaoil’s integrity. During the period when Aker Kvaerner used Unaoil as supplier, the company also obtained independent integrity assessments from international third party integrity specialists, Kvaerner added.

 

The Kashagan project

 

In August 2004, Aker Kvaerner signed a letter of intent wih Agip KCO for fabrication, outfitting and testing of seven barges for oil production at the Kashagan oil field phase 1 in Kazakh waters. More work for further phases of this major field development project followed at later stages, until final delivery in 2011, and administrative close-out in 2012. Aker Kvaerner entered into the individual contracts together with other contracting companies. The total value in the stock exchange releases for these contracts was approximately NOK 12.7 billion, the company said.

Today’s Kvaerner was established after it spun off from Aker Kvaerner into a separate publicly traded company in 2011, after which Kvaerner acquired Aker Kvaerner’s contract in Kazakhstan.

 

Payment dispute with Unaoil

 

According to Kvaerner, the agreement with Unaoil was signed in accordance with Aker Kvaerner’s standard contract terms at that time. Payment was agreed as one percent of the project’s revenues, without a cap. As the scope of Aker Kvaerner’s work at Kashagan gradually increased beyond what was originally expected, Unaoil’s demands for compensation grew accordingly.

Upon a significant increase in project scope, the company in 2010 claimed that Unaoil’s remuneration demands were no longer in reasonable proportion to Unaoil’s deliveries, which consequently increased due diligence demands. The company requested in meetings and through emails that Unaoil provided a more thorough and detailed explanation of its deliveries. Unaoil was also informed that further payments would be withheld until this information was provided. Aker Kvaerner also requested more detailed information about Unaoil’s financial statements.

Unaoil declined to provide documentation that contained the requested level of detail, amongst other referring to their other customers’ commercial interests. Unaoil maintained its claim for payment and therefore filed for arbitration in Oslo.

The arbitration award was issued in January 2013, dismissing Kvaerner’s claim for a reduced remuneration. The arbitration award also rejected Kvaerner’s request for a more detailed review of Unaoil’s finances as basis for further payment. Consequently, the arbitration award imposed an obligation upon Kvaerner to pay Unaoil in excess of NOK 100 million, including Unaoil’s legal fees. In line with the award, Kvaerner paid the imposed amount to a DNB bank account in Norway.

Prior to the arbitration award in 2013, Aker Kvaerner had paid Unaoil approximately NOK 23 million in total. Payments to Unaoil were made to the company’s bank account with HSBC in Monaco, where Unaoil is registered.

Aker Kvaerner and Kvaerner’s deliveries to the Kashagan project were finalised in 2011, with administrative close out in 2012. After 2011, Kvaerner claims it has not had any projects in the Caspian Sea or used any services from Unaoil.

The Norwegian engineering and construction services company also said on Tuesday that its executive vice president & CFO, Eiliv Gjesdal, would step down from his role as CFO as of April 6, 2016.

 

Unaoil ‘shocked’

 

In a statement issued on Monday, April 4, Unaoil said: “Over the past few days grave allegations have been made against us. Unaoil and the Ahsani family take these extremely seriously and will do all that we can to defend ourselves. Many appalling things have been said about our business, allegations are being treated as fact, and speculation is rife.”

The company continued: “We have been shocked by how these allegations have, without any due process, been repeated. We are determined to ensure that we are not wronged, and we are starting that process. At this point we are engaging with authorities and are considering what actions we will take.”

Offshore Energy Today Staff

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