Songa on rig spat: DSME the one responsible

  • Exploration & Production

Songa Offshore, an Oslo-listed offshore drilling contractor, is standing its ground regarding the dispute with South Korea’s shipbuilder Daewoo Shipbuilding and Marine Engineering Co (DSME) over two drilling rigs, the Songa Equinox and Songa Endurance.

To remind DSME, which built four Cat D rigs for Songa Offshore, in 2015 launched arbitration proceedings in respect of the construction contracts for the two first Cat D rigs.

DSME is seeking damages of $373 million including repayment on liquidated damages of $44 million.

The claims relate to alleged cost overruns and additional work on the rigs due to what DSME alleges were inherent errors and omissions in the design documents (often referred to as the FEED package).

On March 18, 2016, Songa Offshore submitted a $65.8 million counterclaim against DSME for the two first Cat D rigs with the intention of recovering damages caused by the default of DSME. The arbitration of these claims and counterclaim is still ongoing.

Apart from a counterclaim, Songa also submitted its defense in the arbitrations and stated that DSME is the only guilty party for the cost overruns.

In its second quarter financials presentation on Friday, Songa Offshore said it remains confident of its position. It still sees DSME as the responsible party for the delays, and said that any attempt to recover cost overruns is of no merit due to the “turn-key” nature of the construction contracts.

Songa Offshore added that it had obtained legal opinions from highly reputable law firms in the UK and Norway and a Queen’s Counsel all of which confirm the company’s position.

 

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