Fred Olsen Energy cancels disputed HHI rig contract

Fred Olsen Energy cancels disputed HHI rig contract

In an ongoing spat between Fred. Olsen Energy and Korean mega yard Hyundai Heavy Industries (HHI), a rig contract has been cancelled.

Bollsta Dolphin, a wholly owned subsidiary of Fred. Olsen Energy, cancelled the contract for construction of a semi -submersible drilling rig citing delays in the delivery.

Bollsta is asking for a refund of its first instalment of $186m plus accrued interest.

The rig was on 26 October 2012 contracted by Dolphin Drilling, another wholly owned subsidiary of Fred. Olsen Energy, to Chevron, a contract that has since been terminated.

HHI for its part is looking to sue Bollsta Dolphin a claim Fred. Olsen Energy dismissed five days ago as “unfounded”.

The news has sparked debate among Splash readers with one reader commenting: “Another energy company trying to stiff a shipyard on construction costs. When the market recovers, I wonder how many shipyards will remember that they got into this mess by offering sweetheart finance deals to get the contract. In fact, I wonder how many shipyards will be left standing after they eat these rigs.

The loss of the rig contract, worth some $700m, is a bitter blow to HHI which is reeling from continued losses largely down to its offshore exposure. It has just revealed a net loss of KRW451.4bn ($399m) for the third quarter.

Sam Chambers

Starting out with the Informa Group in 2000 in Hong Kong, Sam Chambers became editor of Maritime Asia magazine as well as East Asia Editor for the world’s oldest newspaper, Lloyd’s List. In 2005 he pursued a freelance career and wrote for a variety of titles including taking on the role of Asia Editor at Seatrade magazine and China correspondent for Supply Chain Asia. His work has also appeared in The Economist, The New York Times, The Sunday Times and The International Herald Tribune.

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1 Comment

  1. Avatar
    Peter Williams
    October 27, 2015 at 11:41 am

    The yards are in trouble not because of the sweetheart contracts but because of their ‘top down’ management culture, incompetence, poor quality & gross overmanning, all of which have resulted in delivery delays. These delays have given operators & contractors reasons/excuses to cancel. There is nothing about any of these rigs which pushes the limits of mankind’s knowledge. They’re not hover rigs, or nuclear powered or anything. The main components are valves, pumps & pipes, and the yards have struggled getting the tin bashing right.The software making it all work together is causing problems, but most of that is snake oil pushed by vendors, it doesn’t make the operation better. If there was justice these yards would fold & something better come along & pick up the pieces.