Offshore services provider Marco Polo Marine has commenced a contractual dispute resolution process against Sembmarine’s PPL Shipyard (PPLS) that is building the high-specification jack-up rig, and wanted to cancel the rig building contract.
“PPLS is of the view that the purported termination by MP Drilling (subsidiary of Marco Polo Marine) is to avoid its obligation to pay the second disbursement of 10% of the contract price, that has already accrued and due to PPLS immediately on the execution of the contract,” Sembmarine said in a statement.
“This payment was deferred twice at the request of MP Drilling, and is payable by 30 November 2015,” it said.
On 17 November, Marco Polo Marine has unilaterally terminated the $214.3m rig order at PPLS, saying it found cracks on all three legs of the new rig during two rounds of tests, notwithstanding repair works carried out after the first round of tests.
Sembmarine defended by saying that the new rig was “substantially ready to be completed for delivery” and “more than 98%” of work had been completed.
“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,” Sembmarine said.
“Notwithstanding the 30 November 2015 delivery date, the contract provided that PPLS has an additional 210 days (…) to make good any defect and deliver the rig to MP Drilling in accordance with the contract,” it said.
“In view thereof, MP Drilling’s purported termination on 17 November 2015 is wrongful and without any justification whatsoever,” it added.
Sembmarine said PPLS’s position is that the contract is still subsisting and Marco Polo Marine is in repudiatory breach, while Marco Polo Marine on the other hand is seeking a refund of $21.4m of initial payment plus interest from Sembmarine.
The contract was inked in February 2014 and it came with an option for two further rigs. Marco Polo Marine had said the group’s entry into the rig business was in view of the “favourable demand-supply dynamics” back then.
The offshore market, however, slumped when global crude oil prices crashed during the last quarter of 2014, pushing down rig utilisation and charter rates.
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