Rig spat between Songa Offshore and DSME goes on

Songa Endurance

The rig dispute between the offshore drilling contractor Songa Offshore and the South Korean shipbuilder Daewoo Shipbuilding & Marine Engineering (DSME) is yet to be resolved.

The dispute between the pair remains unresolved even after the delivery of all four Cat D rigs, that Songa ordered from DSME in 2011 and 2012, with the fourth and final Cat D rig delivered in March 2016.

To remind, in July 2015, Songa Offshore received from DSME notices of arbitration in respect of the construction contracts for the Cat D rigs. On 16 and 20 November 2015 respectively, Songa Offshore received claim submissions from DSME related to Songa Equinox and Songa Endurance, the first two Cat D rigs, in which DSME asserted aggregate claims of $373 million, including repayment of liquidated damages of $44 million.

The claim asserted relates to alleged cost overruns and additional work in relation to Songa Equinox and Songa Endurance rigs due to what DSME alleges were inherent errors and omissions in the design documents (as often referred to as the FEED package).

The first Cat D rig, Songa Equinox, was delivered to the offshore driller in June 2015 and started its drilling contract with Statoil in early December. The second Cat D rig, Songa Endurance, was delivered in August 2015, arrived in Norway in early December, and started the contract with Statoil at the end of December.

 

Songa strikes back

 

On March 18, 2016, Songa Offshore submitted a $65.8 million counterclaim against DSME for the first two Cat D rigs by means of which Songa Offshore intends to recover damages caused by the default of DSME.

In its first quarter 2016 report last week, Songa Offshore reiterated its view that DSME was responsible for the delays and any attempt to recover cost overruns was of no merit due to the “turn-key” nature of the construction contracts.

In this respect, the company stated it has obtained legal opinions from law firms in the UK and Norway and from a Queen’s Counsel all of which confirm the company’s position.

Offshore Energy Today Staff

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