Coastal Contracts' Unit TML Seeks $5.65M in Damages from 2 Rig Builders

Malaysia's Coastal Contracts Berhad's subsidiary Thaumas Marine Ltd. (TML) filed a notice of arbitration in Singapore Friday, seeking damages of $5.65 million relating to the construction of a jackup by China's Yantai CIMC Raffles Offshore Limited (CIMC Raffles) and co-builder Dynamic Driller Limited.

TML commenced arbitration proceedings with the Singapore International Arbitration Centre (SIAC) Oct. 9 against both parties, citing delays in delivery of the jackup and deviations from the technical specifications as agreed in the rig building contract, Coastal Contracts said in a filing with stock exchange Bursa Malaysia Friday.

According to the Sabah-based company, the JU 2000E F&G design drilling jackup was scheduled for delivery April 30 or no later than the cancellation date of June 30, failing which the builders "would be liable for liquidated damages for $50,000 only per day, up to a maximum of $5 million only."

With the newbuild jackup deemed to be technically ready for delivery only on Sept. 11, or 73 days after the cancellation date, Coastal Contracts stated that CIMC Raffles and Dynamic Driller are liable to TML for liquidated damages amounting to $3.65 million.

In addition, TML discovered in late April 2015 the existence of "several critical and major non-conformities of the Vessel’s parts and equipment which significantly deviated from the Technical Specifications as agreed. As a result of such non-conformities, specifically with regard to the Vessel’s generators and cranes, TML incurred damages amounting to the sum of $2 million only."  Coastal revealed that TML would be claiming this sum from the two rig builders.

While TML has initiated arbitration proceedings against CIMC Raffles and Dynamic Driller to pursue its claims for breaches of their contract obligations, Coastal Contracts said its subsidiary is also seeking to resolve the dispute amicably.

Meanwhile, rig builders -- mostly Asia -- are facing a tough business environment. Newbuild rig orders have fallen sharply due to the prolonged downturn in global oil prices, now around half the value from a year ago, as oil and gas companies cut capital spending in response to the gloomy market outlook.

Reduced drilling activities have reduced demand for rigs, with data from Rigzone's RigLogix databases indicating that the worldwide rig utilization level was at 62.8 percent Oct. 8, down from 75.9 percent a year ago.

Separately, Singapore-based Energy Drilling Pte Ltd. reported Thursday that Thailand's PTT Exploration & Production International (PTTEPI) has issued a Letter of Intent to Award (LOI) to contract the EDrill-2 tender barge rig for a firm term of 18 months with an option period of 30 months.

PTTEPI intends to deploy the EDrill-2 for the Zawtika Development Drilling Campaign (Phase 1B + Infield Phase 1A + Phase 1C) offshore Myanmar. Under the contract, EDrill-2 will drill around 67 wells from 10 wellhead platforms in water depths of up to 525 feet (160 meters). Drilling will commence in mid-December, with EDrill-2 currently undertaking pre-mobilization inspections and third party equipment installations.


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