FOE Stands Firm on Cancellation of Newbuild Semisub Contract with HHI

Norway's Fred Olsen Energy ASA (FOE) referred Wednesday to a previous notice advising that South Korea's Hyundai Heavy Industries Co. Ltd. (HHI) had raised claims against Bollsta Dolphin Pte. Ltd. (Bollsta), a wholly owned subsidiary of the company, of about $167 million under a contract for the design and construction of a semisubmersible drilling rig, as well as to a subsequent notice advising that Bollsta had cancelled the contract.

The disputes between HHI and Bollsta are subject to arbitral proceedings.

As part of these proceedings Bollsta has received HHI’s quantification of their claim that Bollsta was not entitled to cancel the contract. In addition to claiming entitlement to the first instalment HHI claims an additional payment of about $178 million. An alternative claim of $38 million has been submitted by HHI should their primary claim fail.

The contract was signed on May 25, 2012 and fabrication started in June 2013. By March 31, 2015 the rig should have been completed and delivered. Seven months thereafter with no realistic prospect of completion before May 2016 Bollsta cancelled the contract. Variations to the work were of minimal consequences to the yard.

Bollsta, together with FOE, remain firm that the cancellation was rightful, that Bollsta is entitled to a full repayment of the first instalment (of about $186 million) and that none of HHI’s claims holds any merit; they will all be vigorously refuted.

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