Pieridae Energy says engineering company seeking exit from Goldboro LNG deal

CALGARY — The engineering company hired to build the proposed Goldboro LNG export facility in Nova Scotia is withdrawing from an agreement to provide a fixed price contract for the job, developer Pieridae Energy Ltd. said Monday.

The Calgary-based company announced it has received written notice from Kellogg Brown & Root Ltd. that it is no longer prepared to enter into a lump-sum turnkey engineering, procurement, construction and commissioning contract for the project as agreed in March 2019, although it is willing to provide the services on other terms.

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Pieridae is considering options including legal action in response, but has already had discussions with other firms willing to replace KBR, said CEO Alfred Sorensen.

"There are other reputable and experienced firms who have the expertise to provide these services, with some already indicating a willingness to replace KBR," he said in a news release.

"We have had discussions with several of them to gauge their interest."

In an emailed statement on Monday afternoon, KBR said it doesn't comment on individual contracts but "will vigorously defend any accusation of breach of contract."

In a report on Monday, analyst Darrell Bishop of Haywood Securities said the news represents a "fairly material setback" for the project because a fixed price contract is considered a "critical stage" before construction.

In May, Pieridae announced a delay until June 2021 to make a final decision on proceeding with the project to export liquefied natural gas from Canada's East Coast, citing technical obstacles created by COVID-19.

Also in May, the Alberta Energy Regulator put Pieridae's natural gas supply in question when it refused to transfer licences for production assets purchased from Shell Canada because the application would have split liabilities for cleaning up the sites, especially two gas-processing plants.

Shell and Pieridae are trying to work with the AER to win its approval.

Sorensen says the project is "solid", however, with most of its key permits in hand, a 20-year contract with a German energy company to buy half of the LNG and a potential loan guarantee from the German government.

This report by The Canadian Press was first published July 13, 2020.

Companies in this story: (TSX:PEA)

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