Phillips 66 Sweeny Refinery
DAMAGES CLAIM OMITTED CRUCIAL DETAILS WHICH RESULTED IN DISMISSAL
The Phillips 66 Sweeny Refinery Facility in Old Ocean, Texas produces 265,000 barrels of crude throughput, 140,000 barrels of petrol, and 125,000 barrels of distillates a day. The facility has a Nelson Complexity Factor of 13.4 and a Clean Product Yield Capability of 86%. The Sweeny Refinery handles high-sulfur crude oil, low-sulfur crude oil, and other products such as petrol, diesel, aviation fuels, petrochemical feedstocks, home heating oil, as well as fuel-grade petroleum coke. Seated on 14,000 acres, the Refinery is approximately 65 miles southwest of Houston, Texas.
PSP Industries was retained by the project engineer in August 2019, to supply custom-fabricated steel ductwork and related materials for the Sweeny Refinery. This retainment comes after months of negotiating terms for Sweeny purchase orders which were based on items provided by the project engineer including GA and IFC drawings, estimated weights, and other needed specifications. The project engineer provided PSP Industries with IFC drawing information in July 2019, which PSP Industries stated was incomplete and not of significance to formulating its bid. Per original plans, the project engineer was to provide free material to PSP Industries in November 2019, as PSP Industries planned refractory material installation to occur continuously and sequentially – a late delivery of the free-issued material would result in a price impact. The project engineer delivered the free-issued material in a piecemeal manner between November 2019, and December 2019. PSP Industries noted this form of delivery as an ongoing delay to the start of fabrication which pushed PSP Industries’ production into the holiday season. PSP Industries then chose to commence installation in January 2020 to prevent any inefficiencies that could have resulted in an increased cost to the project engineer.
In February 2020, PSP Industries notified the project engineer that the results of the comprehensive comparison projected a weight increase of 10% and added design complexity resulting in a combined material and labor cost increase of $1,500,000 for the Sweeny project. PSP Industries notified the project engineer of changes to the work and deviations to the delivery schedule throughout its performance period. PSP Industries then provided the project engineer with their intent to file a demand for arbitration. The project engineer countered by alleging entitlement to $471,000 in liquidated damages for the Refinery, despite not notifying PSP Industries of an intent to assess liquidated damages. Nonetheless, the project engineer completed the Phillips 66 Sweeny Refinery project and commenced hydrogen production in October 2021 based on a press release distributed.
Cokinos | Young, who represented PSP Industries, then engaged Peritia to review and assess claims arising from and related to purchase orders between the project engineer and PSP Industries. PSP Industries alleged delays on the Sweeny Project stemmed from direct changes, constructive changes, and COVID supply chain delays.
Peritia assessed the direct and constructive changes incurred during execution, the project engineer’s provision of information, the delivery of materials, as well as, an expert report secured by the project engineer. Our team noticed the expert report was not adjusted for the project engineer’s untimely revisions to the IFC drawings and delayed delivery for convenience. A thorough assessment enabled Peritia to ascertain that PSP Industries provided sufficient notice and communication of delays impacting the project and that the project engineer failed to provide the correct IFC drawing information and free-issued material in a timely manner. Peritia identified these delays and opined that the project engineer’s expert report omitted crucial information on PSP Industries’ efforts and communications, as well as, the project engineer’s untimely approvals and lack of substantiation on the alleged delay-related damages. Peritia’s expert provided a rebuttal report. Based on the findings and reports of incurred damages and delays, arbitrators dismissed with prejudice the project engineer’s claim, and PSP Industries was awarded nearly all the damages and legal fees.
Cokinos | Young
Old Ocean, TX
265,000 barrels of crude throughput, 140,000 barrels of petrol, and 125,000 barrels of distillates
Oil, Gas & Chemicals
Claims & Expert Witness; Acceleration, Delay & Disruption Claims; Scope Changes; Payment Claims; Damage Quantification