Thaioil has backup plan to end CFP project delays

It can call on parent companies to end contractor row, or start afresh

Thaioil Plc is prepared to exercise its rights under a parent guarantee agreement with the main contractors of the US$5.37 billion Clean Fuel Project (CFP) to resolve persistent project delays.

This step will be taken if negotiations with the main contractor consortium, known as UJV, fail to produce a resolution, a source close to the project said.

The CFP, a landmark project aimed at elevating Thaioil to the ranks of the world’s top-tier refineries, has faced delays partly due to disputes between UJV — the consortium of Samsung Engineering (Thailand) Co, Petrofac South East Asia Pte, and Saipem Singapore Pte Ltd — and its subcontractors.

These disputes have triggered prolonged labour protests from subcontractor workers demanding unpaid wages. Subcontractors allege UJV has not met its payment obligations, leaving them unable to pay their workers.

The source said that if negotiations remain inconclusive, Thaioil may invoke its rights under agreements signed with the parent companies of UJV’s three contractors — Samsung Engineering (South Korea), Petrofac (UK), and Saipem (Italy). These agreements ensure accountability if UJV fails to meet its contractual obligations.

Should parent companies fail to address the issues after the parent guarantee is invoked, the matter will proceed to arbitration in Singapore. In parallel, Thaioil has prepared contingency plans, including the possibility of engaging a new main contractor to complete the project.

“Thaioil has consistently supported the main contractor, including extending project timelines and increasing the budget to mitigate Covid-19 impacts. However, the current situation is like the main contractor is using the CFP project as ‘a hostage’ to gain leverage over subcontractor payment issues, which they themselves created,” the source added.

Bandhit Thamprajamchit, chief executive officer and president of Thaioil, confirmed the company has prepared options to address the challenges but declined to provide further details.

“While the CFP’s delay means the project will not commence operations as scheduled in 2024, this is not expected to significantly affect Thaioil’s overall business. The industry outlook for next year remains uncertain, with challenges stemming from China’s sluggish economic recovery and escalating trade conflicts,” he said.

Mr Bandhit said Thaioil has complied with all obligations. The company has already paid UJV in full, and the responsibility for unpaid wages lies with the contractors. “Nonetheless, Thaioil is not ignoring the issue. The company is committed to resolving it swiftly to ensure fair treatment for stakeholders of the project, including workers,” he added.