Santos has filed a damages claim of almost $1.5 billion against US-based construction firm Fluor Corporation over work carried out during the troubled development of its $US18.5 billion GLNG project in Queensland.
The claim, filed in the Queensland Supreme Court in December, relates to work that the Australian subsidiary of Fluor was contracted to complete on the development of coal seam gas fields and hubs in the Surat Basin.
Santos, the operator of the GLNG venture, is contending that Fluor was not entitled to some $1.47 billion of costs under the terms of its engineering and construction contract.
Disclosing the legal action in a US filing, Fluor said it believes the claims by Santos "are without merit" and said it is "vigorously defending" them.
"Based upon the present status of this matter, the company does not believe it is probable that a loss will be incurred," Fluor added in the filing, justifying its decision not to record a charge for the matter in its results.
A Santos spokesman declined to comment.
The claim is the latest to emerge amid Australia's $200 billion boom in investment in complex LNG projects, confirming
fears that cost blowouts and delays during construction would lead to a multi-billion wave of disputes as producers and contractors sought to claw back funds.
CIMIC is embroiled in a dispute over the construction by its UGL subsidiary of a power plant at Inpex Corporation's $US37 billion Ichthys LNG project in Darwin, while Chevron's over-budget Gorgon LNG project off Western Australia has also seen contractual disputes.
Fluor noted it completed "a cost reimbursable engineering, procurement and construction management services" for Santos on a large network of natural gas gathering and processing facilities in Queensland.
Dissatisfaction over the work carried out by Fluor caused the GLNG venture to revamp its contracting strategy, switching from using the US firm as the "turnkey" contractor to using several smaller contractors that they hoped would reduce costs.
Santos's GLNG partner Total SA in late 2014 blamed the unexpectedly high costs for the upstream development of coal seam gas fields in Queensland for cutting the volume of gas reserves at the project because the gas couldn't be economically developed.
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