Norwegian oil service provider Sevan Marine ASA has issued an arbitration notice to Oil and Natural Gas Corporation (ONGC) after the Indian public sector oil explorer encashed the bank guarantee given by the former for an ultra- deepwater drillship charter-hire contract.
In June 2008, ONGC had charter-hired the drillship Sevan Driller-II from Sevan Marine for three years at a day rate of $524,900, translating into a total contract value of $569 million. The newly-built rig was supposed to be deployed with ONGC by December 31, 2010, but the Norwegian firm failed in its commitment forcing the state-run explorer to invoke the performance bank guarantee submitted by Sevan against the contract.
In a press statement, Sevan Marine said it had “issued a notice of arbitration to ONGC, informing the explorer of its intention to resolve certain disputes” relating to the June 2008 order.
“In the arbitration, Sevan Marine has disputed ONGC’s right to call on a bank guarantee for the sum of $15.9 million and/or to receive money under the bank guarantee on the grounds that ONGC has suffered no loss and/or that any loss suffered by ONGC does not amount to the sum of the bank guarantee,” the statement said.
It has also filed a petition with a court in India seeking an restrain order on ONGC from invoking the bank guarantee until the dispute wass resolved through arbitration.
ONGC officials said Marine had not been able to keep to its commitment for deploying Sevan Driller-II and had instead offered a different rig for a five-year period. “This is a major deviation from the offer they made to us in an international tender. If ONGC accept the present offer of a different rig for five years, it would mean giving a multi-billion-dollar contract on a nomination basis. This is not acceptable,” an official said.
Minister of State for Petroleum and Natural Gas Jitin Prasada had on November 25, 2010, informed Parliament that ONGC hired Sevan Driller-II from Norway’s Sevan Marine ASA for a three-year period, beginning December 31, 2010.
However, Marine’s website shows the rig had been leased to Brazalian national oil firm Petrobras SA on a six-year contract, which will commence from the second quarter of 2012. The company had in two separate press statements in June 2008 stated it had received a firm order from ONGC for the charter-hire of an ultra-deepwater drilling unit. “The drilling contract will have a fixed term of three years, starting from December 31, 2010,” the statement had said.
According to the contract, Sevan Marine was to provide a newly built drilling rig to ONGC, based on its proprietary Sevan 650 design. The rig was supposed to have the most advanced drilling capabilities in the industry, with a capacity to drill in water depths up to 10,000 feet. The Norwegian firm’s partner in India is Jindal Drilling and Industries.
