PDH project in Belgium delayed to mid-2024 as Borealis retenders construction contracts

This story also appears on Chemical Week by S&P Global.

Completion of a propane dehydrogenation plant being built at Kallo, Belgium, will be delayed by at least six months into the second half of 2024 after owner Borealis announced it would retender the majority of the project's construction contracts following termination of all contracts with the main contractor IREM Group.

Borealis terminated the contracts with IREM, originally in charge of 80% of the PDH plant's construction work and 80% of the average 1,200 workers on site, after investigating media reports alleging human trafficking, exploitation of 55 workers, and "modern slavery" related to the construction of the Eur1 billion ($1 billion) plant.

The PDH unit had previously been scheduled to start operating late in the third quarter of 2023, with a nameplate capacity for 750,000 mt/year of propylene.

"We terminated all contracts with the IREM Group due to their malpractices. [We are] currently in the process of retendering the majority of open contracts for this construction project, a process which will still take some time," Borealis spokesperson Kylie Carlson tells CW. Borealis estimates the retendering process will delay the startup of the PDH plant by at least six months, shifting the expected startup date into the second half of 2024, she says.

As a consequence of the terminated contracts, only a minor part of the construction work for the PDH unit can resume, according to the company. A statement by Borealis on its website says that in light of the recent media reports of alleged misconduct and an ongoing inspection by the Belgian authorities regarding IREM at the construction site, Borealis decided to terminate all contracts with IREM after having initially suspended the contracts on July 27.

The terminated contracts are for what Borealis describes as highly specialized piping and mechanical works, as well as electrical and instrumentation works.

Borealis has implemented additional social controls to ensure that the remaining contractors entering the site are fully compliant with Belgian labor law. These include each (sub)contractor signing a formal binding declaration prior to startup, in which they formally confirm their full compliance with applicable Belgian labor, social security, and tax laws. Each (sub)contractor must also provide Borealis a list of all personnel before starting work on the site and confirm for every individual that they are fully compliant with applicable Belgian labor, social security, and tax laws prior to startup.

"We are taking all necessary steps to ensure that the remaining contractors entering the site are fully compliant with Belgian labor law. As a first step we have terminated all contracts with our contractor IREM, who was in charge of 80% of the works on site. We have also implemented additional social controls well beyond industry standards to identify and address any potential lack of control by (sub)contractors who are not compliant," says Wim De Smet, Kallo location leader at Borealis.

Belgian social inspectors first visited the construction site and carried out interviews on a number of works on the PDH site at the end of June. It was after the intervention of the Belgian authorities in mid-July that Borealis "realized that there might have been social fraud on a large scale," it said earlier.

Borealis CEO Thomas Gangl confirmed to CW on July 28 that the initial suspension of IREM until further notice would delay completion of the plant. Gangl said at the time that if Borealis had to shift the contract to another company, it would cause "a significant delay."