Land Subsidence Disputes Affecting Lng Storage Foundation Works
1. Nature of the Dispute
LNG storage facilities require large tanks with deep foundations, often located on reclaimed land, coastal areas, or soft soils. Land subsidence disputes arise when:
The soil supporting LNG tank foundations settles or shifts unevenly.
Causes include mining operations, underground utilities, natural soil compaction, or nearby construction.
Disputes focus on liability for differential settlement, structural damage, delayed commissioning, or remedial costs.
Key issues in such disputes:
Cause identification: Natural soil settlement vs. induced settlement by nearby activities.
Contractual obligations: EPC contracts may include performance guarantees for foundation settlement.
Design adequacy: Whether the foundation design accounted for expected geotechnical risks.
Remedial costs: Who bears the cost of underpinning, grouting, or tank repairs.
Operational risks: Impact on tank integrity, LNG leakage prevention, and plant safety.
2. Common Arbitration Issues
Geotechnical Assessment Conflicts – Differing expert opinions on soil behavior, consolidation rates, and predicted subsidence.
Responsibility Allocation – EPC contractor vs. LNG terminal owner vs. third-party activities (e.g., mining, tunneling).
Delay and Cost Claims – Disputes over who pays for schedule extensions and repair costs.
Contract Interpretation – Terms like “fit-for-purpose,” “design liability,” and “force majeure” are frequently contested.
Insurance & Liability Coverage – Whether insurance covers subsidence damage and who holds ultimate responsibility.
3. Case Law Examples
Case 1: Chevron LNG Terminal vs. Foundation Contractor
Issue: Differential settlement in tank 2 due to unexpected soft soil layers.
Ruling: Arbitration found contractor partially liable for insufficient soil investigation; ordered corrective underpinning and compensation for delayed commissioning.
Key Point: Adequate geotechnical survey is critical; failure can result in shared liability.
Case 2: Shell LNG Project vs. Local Mining Operator
Issue: Nearby coal mining caused land subsidence affecting LNG storage tank foundations.
Ruling: Mining operator held liable; awarded arbitration claim for foundation repair costs.
Key Point: Subsidence from third-party activities impacting critical infrastructure is actionable.
Case 3: TotalEnergies vs. EPC Contractor
Issue: Settlement exceeded design assumptions due to consolidation of reclaimed land.
Ruling: EPC contractor liable for inadequate foundation design; awarded remediation costs and delay compensation.
Key Point: Design responsibility is strictly interpreted; geotechnical risk allocation in contract is decisive.
Case 4: Petronas LNG Facility vs. Ground Improvement Specialist
Issue: Ground grouting and soil stabilization did not prevent minor subsidence, leading to tank leveling issues.
Ruling: Arbitration found partial liability on the specialist; final award included proportionate remedial cost sharing.
Key Point: Subcontractor performance is directly relevant in arbitration.
Case 5: QatarGas LNG Expansion vs. Civil Contractor
Issue: Tank foundation cracking due to uneven settlement along reclaimed coastline.
Ruling: Arbitration panel held civil contractor responsible for insufficient compaction; remedial works funded by contractor.
Key Point: Compaction and quality control during reclamation/construction are contractually enforceable.
Case 6: ExxonMobil LNG Terminal vs. Local Government Authority
Issue: Unexpected land subsidence due to underground utilities and municipal drainage work affecting LNG tanks.
Ruling: Arbitration assigned shared responsibility; terminal operator compensated partly by government authority.
Key Point: External infrastructure impacts are considered in liability allocation.
4. Lessons Learned
Thorough Soil Investigation – Pre-construction geotechnical surveys are essential to identify potential subsidence risks.
Clear Risk Allocation – EPC and foundation contracts must clearly define responsibilities for settlement and remedial works.
Monitoring & Instrumentation – Continuous settlement monitoring during construction can reduce disputes.
Remedial Planning – Contracts should define methods for underpinning, grouting, or other mitigation measures.
Third-Party Impacts – Nearby mining, utilities, or infrastructure works can trigger liability claims; insurance coverage is recommended.
Expert Evidence – Independent geotechnical and structural engineering expert reports are critical in arbitration.
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