Mexico's Pemex attempts to recover refinery cost overrun in US court

29 May 2013 03:15  [Source: ICIS news]

HOUSTON (ICIS)--Mexico’s state-owned oil company Pemex repeated allegations in a statement released on Tuesday that a joint venture had bribed company officials so it could secure millions of dollars in cost overruns for a refinery expansion project.

The partners in the Conproca joint venture, Germany’s Siemens and South Korea’s SK Engineering & Construction, have each requested that the lawsuit be dismissed, according to court documents.

SK alleged that the cost overruns were the subject of a 10-year international arbitration. The result was an award worth more than $500m (€385m) in favour of the Conproca joint venture.

SK alleged that the Pemex lawsuit is an attempt to obstruct confirmation of the award.

Separately, Siemens alleged that the Pemex lawsuit is a collection of vague and inadequate allegations that fails to show how the project directly harmed the Mexican company.

Pemex sued Siemens and SK in the US district court for Southern District of New York, because the invoices for the cost overrun were sent via wire to the state for payment.

The joint venture, Conproca, submitted a proposal requiring a $1.38bn investment to expand the Pemex refinery at Cadereyta Jimenez in Nuevo Leon state in Mexico, Pemex alleged.

Conproca won the contract in 1997 and the project was supposed to be completed by 2000, Pemex alleged.

Conproca, however, allegedly underbid the project, as it faced a financial shortfall, Pemex said.

To offset this shortfall, Conproca allegedly devised a plan to manufacture a series of cost overruns, Pemex said.

Conproca allegedly bribed Pemex officials, so it could allegedly obtain the agreements needed to pay for the cost overruns and those payments would offset its financial shortfall, Pemex alleged.

Altogether, Conproca allegedly submitted over $159m worth of what Pemex termed as fraudulent invoices.

SK requested that the court dismiss the case, as it alleged that Pemex failed to prove the company had any knowledge of the alleged scheme or that it intended to participate in it.

"PEMEX’s allegations of bribery are unidentified and unspecified," SK said in the court document.

Siemens requested that the case be dismissed, because it has nothing to do with the US, as the alleged conduct took place in Mexico and all of the parties involved are foreign companies.

Regarding the invoices, Pemex failed to identify a single statement that was false or deceptive, Siemens alleged.

In the court document, Siemens described the lawsuit as a "string of unsupported innuendo, incomplete accusations and nonsensical chronology", providing no basis for the claims being sought by Pemex.

Like SK, Siemens alleged that the Pemex lawsuit is intended to counter the $500m international arbitration award.

($1 = €0.77)

By: Al Greenwood
+1 713 525 2645

AddThis Social Bookmark Button

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly