Marco Polo stands its ground in SembMarine rig spat

The rig construction dispute between Marco Polo Marine’s Marco Polo Drilling (MP Drilling) and Sembcorp Marine’s PPL Shipyard shows no signs of stopping, as both companies keep refuting the claims of the other. 

In its latest announcement issued on Monday, MP Drilling disagreed with PPL’s statement from last week accusing MP Drilling of being in a repudiatory breach as well as calling its termination of the rig construction contract wrongful.

While PPL Shipyard did not deny the existence of the cracks on the rig legs that MP Drilling listed as one of the reasons for ending the contract, MP Drilling emphasized that the nature and number of cracks and other defects (such as porosity) found on all three legs of the new rig were, at this stage of construction, wholly unacceptable.

Rig defects

“Any defect discovered will be made good and retested to the satisfaction of the Classification Society and MP Drilling before delivery,” PPL said last week.

However, MP Drilling maintained it was entitled to terminate the contract detailing the defects on the newbuild rig. Namely, on or about 20 to 22 August 2015, a full preload test commissioned by PPL was carried out on the new rig, followed by a full length jacking test and thereafter a 100% non-destructive testing (1st NDT) on all leg connections to spud cans. Among others, 70 cracks were found on all three legs of the new rig, including cracks on the parent material, with a majority of the cracks detected at or near the weld joints on both the internal and external surfaces of the spud cans.

MP Drilling further added that, following completion of the repair works by PPL on or about October 22, 2015, retests were scheduled by PPL. However, PPL did not carry out a full length jacking test prior to a 100% non-destructive testing as per the first round of tests. Instead, PPL conducted only a full preload test on or about October 29, 2015 followed by a partial non-destructive testing on all leg connections to spud cans (save for the external spud cans below water line) (2nd Partial NDT) on or about October 30, 2015 to November 5, 2015. Even without a full length jacking test being carried out, more than 180 new cracks (not including other defects) were found on all three legs of the new rig during the course of the 2nd Partial NDT, MP Drilling emphasized.

This does not include the condition of the external spud cans below water line, on which non-destructive testing has yet to be conducted, the company added.

According to MP Drilling, the consequence of termination is that MP Drilling is discharged from its obligations under the rig construction contract and is under no further obligation to perform the same. This includes a discharge of its obligation to make any further payment of the contract price or any other sum under the contract to PPL.

Contract still subsisting?

In addition, MP Drilling also referenced PPL’s statement saying it “has elected to affirm” the contract and that the contract “is still subsisting”, and deemed it inconsistent with the first announcement it made earlier declaring that PPL “will terminate the Contract”.

“MP Drilling views the purported election by PPL to affirm the contract invalid and an afterthought to pursue payment of the 2nd disbursement of the contract price from MP Drilling when there is no such payment due or payable to PPL following the termination of the Contract on 17 November 2015,” MP Drilling explained.

Furthermore, as PPL did not accede to MP Drilling’s demand for a refund, the latter initiated the contractual dispute resolution process against PPL. On November 26, 2015, MP Drilling has advanced this process to the second stage, i.e., mediation. Should PPL refuse to mediate, MP Drilling will proceed to start arbitration against PPL, said the company

The company has likewise initiated the dispute resolution process against PPL in view of the latter’s refusal to confirm that it would not pursue, what the company regards as an unwarranted demand, for payment of the 2nd disbursement of the contract price.

PPL said last week that it would be seeking payment of the second disbursement if MP Drilling fails to make payment by November 30, 2015.

As a response, MP Drilling has initiated the dispute resolution process against PPL in view of the latter’s refusal to confirm that it would not pursue, what the company regards as an unwarranted demand, for payment of the second disbursement of the contract price.

Offshore Energy Today Staff