Malaysia’s Sime Darby has paid up $41.9 million to the Qatari unit of Denmark’s Maersk Oil to relieve its energy and utilities division from outstanding work at the Block 5 Al Shaheen project.
The energy and utilities division of the Malaysian conglomerate was awarded the contract in 2007 for the project involving building and installing a process platform, a utility platform and three bridges in the field off Qatar.
The settlement will see the reduction in warranty period provided for the project from 24 months to 18 months from 17 March 2011. The exposure of the E&U division to the project will also be reduced to $16 million from an initial $63 million performance bond provided for the project.
As a result, Sime Darby expects to write back 100 million ringgit ($33 million) to its profit and loss account from the reduced provisions for the project.
Prior to the the settlement, some 526 million ringgit had been set aside for the financial year of 2010 for the cost overruns at Al Shaheen.
The 526 million ringgit provision accounts for a quarter of the 2.1 billion ringgit loss provision on the books of Sime Darby’s E&U division for financial year 2010, according to a Kenanga Research report.
The Malaysian conglomerate plunged into the red during the third quarter ended 31 March 2010 on the massive