Velesto abandons sunken rig while progressing insurance claims

Malaysian rig owner Velesto Energy is progressing on the insurance claims and it has issued a notice of abandonment for its NAGA 7 rig, which tilted and submerged off Malaysia in May 2021.

On 3 May 2021, an incident involving Velesto NAGA 7 drilling rig occurred due to the penetration of one of its leg into the soil formation whilst jacking up at Salam-3 well off the coast of Sarawak for ConocoPhillips.

The rig tilted and, on 4 May 2021, it submerged at the location. During the incident, drilling activities had not started and no well had been drilled.

All 101 personnel on board were safely transferred to shore and all the relevant authorities were duly informed. The incident location is currently being monitored for security and any potential adverse impact. The company is investigating the incident and is evaluating options.

As previously reported, the rig is covered by insurance and Velesto expects that the financial impact of this rig incident will be mitigated by the insurance.

In its quarterly report on Monday, Velesto informed that the NAGA 7 rig remains submerged off the coast of Sarawak after the incident on May 3.

The incident area is secured while the company is working with the insurance underwriters and Protection & Indemnity (P&I) Club on the way forward. The rig and other related liabilities are adequately covered under the Hull & Machinery insurance and the P&I Club, respectively.

Progressing on the insurance claims, Velesto Drilling, as the insured under the H&M policy, on 31 May 2021 issued a notice of abandonment of the submerged rig, NAGA 7 to the H&M insurers, pursuant to the H&M policy and currently await their response.

NAGA 7 is an independent-leg cantilever jack-up rig delivered in January 2015. It has a drilling depth capability of 30,000 feet and has a rated operating water depth of 375 feet.

The rig was hired by ConocoPhillips in March 2021 to drill up to three wells for about $8 million.