Photo: Illustration. Source: Bumi Armada

Force majeure notice served to India’s ONGC for Bumi FPSO

Malaysian FPSO operator Bumi Armada has said that India’s ONGC has been served with a force majeure notice related to the charter hire of an FPSO for the Indian company’s offshore project.

Bumi Armada holds interests in associates involved in the construction of an FPSO for the ONGC NELP Block KG – DWN 98/2 Development Project Cluster-II field located on the east coast of Kakinada, offshore India.

The contract for the provision of the FPSO for ONGC’s 98/2Project was awarded back in May 2019 to a joint venture company, Shapoorji Pallonji Bumi Armada Godavari Private Limited (SPBAG).

SPBAG is a 30:70 joint venture between Bumi Armada and Shapoorji Pallonji Oil & Gas Private Limited of India (SPOGPL).

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Bumi Armada said in its 3Q 2020 report on Wednesday that the construction of the FPSO has started but is delayed due to regulatory constraints imposed by the government of various countries following the COVID-19 pandemic.

Bumi Armada said that this has affected the work schedule of various sub-contractors operating in countries which manufacture major components for the FPSO.

In addition, this has indirectly affected the timing to secure additional funding for the 98/2 Project.

As a result, a notice was issued to the charterer advising of a “Force Majeure Event” due to circumstances beyond the control of the associates and subcontractors of the 98/2 Project, Bumi Armada stated.

According to the FPSO provider, the associates remain committed to fulfilling their obligations under the charter contract and are currently in discussion with the charterer regarding the construction timeline, as well as finalising various components of the funding structure.

It is also worth mentioning that the contract is for a fixed period of nine years, valued at approximately $2.1 billion.

ONGC has an option to extend the contract for an additional seven years on a yearly basis at an aggregate contract value of approximately $655 million if all the extension options are exercised.