Italy’s Saipem to challenge Algerian ruling over LNG contract

Italian contractor Saipem said it would challenge the decision of an Algerian court regarding a contract it won back in 2008 to build a liquefaction train at Sonatrach’s Arzew LNG facility.

Saipem and Snamprogetti, former Eni’s unit that merged with Saipem, in a joint venture with Chiyoda, won the contract from Sonatrach for the Arzew LNG train (GNL3) project with a capacity of 4.7 mtpa in July 2008.

The contract was worth about 2.8 billion euros ($2.94 billion) and the partners completed the construction in 2012.

Saipem said in a statement that the Court of Appeal of Algiers on Tuesday ruled in the criminal
proceeding, ongoing in Algeria since 2019, and connected to the 2008 tender award.

In this proceeding, Saipem and Snamprogetti were charged, in accordance with Algerian law, of allegedly “having obtained a contract, with a price higher than the correct value, concluded with a state-owned commercial and industrial company, benefitting of the influence of representatives of that company”; and of “false custom declarations”.

About $209 million

The Court of Appeal of Algiers upheld, on both charges, the judgement of the first-degree ruling issued by the Court of Algiers on February 14, 2022, Saipem said.

This ruling had imposed against Saipem and Snamprogetti fines and damages for an overall amount of approximately 199 million euros ($208.8 million) equivalent at today’s exchange rate of which about €60 million euros in fines and around 139 million euros in favor of the civil parties.

Following the first degree ruling by the Court of Algiers, Saipem said it has set aside an equivalent amount in the financial statements as of December 31, 2021.

Also, the court sentenced two former employees of Saipem, the head of the project GNL3 Arzew and an Algerian former employee, to five years and six years of imprisonment respectively, Saipem said.

The firm said that the court acquitted another employee of Saipem of all charges.

According to Saipem, the Court of Appeal of Algiers has not yet revealed the reasons for the ruling.

Saipem, Saipem Contracting Algerie and Snamprogetti Algeria Branch “will promptly challenge” before the Algerian Supreme Court the decision issued by the Court of Appeal of Algiers, it said.

Under Algerian law, the opposition against the ruling of the Court of Appeal suspends the effects of such ruling with regard to the fines, while the ruling in favor of the civil parties is enforceable despite the pending opposition, it said.

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