Sembcorp Marine, Marco Polo rig dispute heating up

Responding to Marco Polo Drilling’s Tuesday announcement about launching a contractual dispute process against Sembcorp Marine’s PPL Shipyard, the yard on Wednesday said the contract was still in effect and that, in fact, MP Drilling was in breach. 

To remind, MP Drilling, a subsidiary of Marco Polo Marine, last week abolished a jack-up rig construction contract with SembMarine’s PPL Shipyard due to cracks found on all three legs of the new rig during two rounds of tests. MP Drilling also said it would not be taking the delivery of the rig at the same time asking for a refund from the yard of  the initial amount of 10% of the contract price, which is approximately $21.4 million.

PPL Shipyard said on Wednesday the contract was still in effect and Marco Polo Drilling was in repudiatory breach.

“PPL Shipyard did not accept MP Drilling’s repudiatory breach,” the yard insisted.

In addition, PPL Shipyard said it has elected to affirm the contract and its lawyers have notified MP Drilling’s lawyers of this election on November 23, 2015.

According to PPL, the rig is due for delivery on November 30, 2015 and, at the time MP Drilling ended the contract, the rig was substantially ready for delivery as more than 98% of the rig had been completed.

The yard claimed that the final phase of construction included a pre-load test and a jacking trial followed by non-destructive testing.

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

Furthermore, according to the contract, PPL has an additional 210 days after November 30, 2015 to deliver the rig.

The yard stated that this would allow it more than enough time to make good any defect and deliver the rig to MP Drilling in accordance with the contract. Therefore, PPL explained, MP Drilling’s termination of the contract is wrongful and without justification.

PPL also claimed that MP Drilling’s decision to terminate the contract was made to avoid its obligation to pay the second disbursement of 10% of the contract price ($21.43 million), that has already accrued and due to PPL immediately on the execution of the contract.

According to Sembcorp Marine’s PPL, this payment was deferred twice at the request of MP Drilling, and is payable by November 30, 2015.

PPL noted that, since the disputes are of technical nature, they would be referred to the Classification Society. As per the contract, the Classification Society’s decision will be final and binding to both parties.

PPL Shipyard will also be seeking payment of the second disbursement if MP Drilling fails to make payment by November 30, 2015, the yard concluded on Wednesday.

Offshore Energy Today Staff