Tullow battles $277m court case

It has emerged that Seadrill Ghana Operations Limited is demanding $277 million from Tullow Oil Ghana Limited (TGL), a subsidiary of Tullow Oil Plc, in an arbitration process in London.

The company, which filed claims in a Commercial Court in London – United Kingdom, is seeking a declaration that Tullow was not entitled to terminate the West Leo rig contract for force majeure.

Seadrill is seeking payment of $277 million from TGL, before interest and costs.
$204m potential contract revenue for Seadrill

The potential contract revenue for the one-year period is $204 million, which includes $18 million in mobilisation revenue.

The disclosure was made in Tullow Oil Plc’s Trading Statement & Operational Update, issued yesterday.

Case heard in court in May 2018

According to Tullow, the case was heard by Justice Teare in May 2018, and the judgement is expected to be handed down shortly.

Tullow wants liabilities shared amongst TEN partners
Tullow stated that if Seadrill is successful in its claims, it expects that any resulting liabilities would be shared amongst the Tweneboa-Enyenra-Ntomme (TEN) joint venture partners, and Tullow’s estimated share has been recognised in a provision.

Kosmos Energy challenges Tullow in court

However, Kosmos Energy, one of the TEN partners, disagrees.

“Separately, Kosmos Energy is disputing, through an arbitration against TGL before the International Chamber of Commerce, its share of liability (c. 20%) of costs related to the use of the West Leo rig beyond 1 October 2016.

“This arbitration hearing took place in January 2018 and the tribunal’s decision is also expected shortly.

“In the event that TGL is unsuccessful in defending the Commercial Court claims by Seadrill, the arbitration decision will determine whether Kosmos is liable for its share of the amounts payable to Seadrill,” Tullow said.

Tullow issues force majeure to Seadrill on October 3, 2016
Tullow issued a notice of force majeure to Seadrill partners on October 3, 2016 for the West Leo semi-submersible. The unit was carrying out work on TEN development.

Seadrill disputes force majeure claim of Tullow

A notice from Seadrill said it disputed the force majeure claim from Tullow, and warned that it would “enforce all its rights as per the contract and governing law”.

The role of ITLOS injunction

Tullow was said to have halted its contract on the basis that work on the TEN development could not continue, owing to an arbitration case between Ghana and Cote d’Ivoire on the disputed border.

While the case was being considered, Tullow was prevented from drilling any new wells, but was allowed to work on those already drilled.

Seadrill, though, sees it differently. The company said that there were other fields within Ghana where the West Leo has worked previously and that are not subject to arbitration proceedings.

“However, as part of its claim, Tullow has asserted that a further drilling moratorium applies to these additional fields, although no satisfactory justification (for this action) has been provided,” the rig owner said.

According to Seadrill’s quarterly update at the end of September 2016, West Leo was delivered from the shipyard in 2012 and was operated under a contract with Tullow, due to expire in July 2018.

The semi-submersible earned $234.7 million for Seadrill in 2015, with a contracted dayrate of $605,000 – the third highest in the company’s fleet.

The driller claims that in the event of termination for convenience, Seadrill partners are entitled to an early termination fee of 60% of the remaining contract backlog.

The amount is subject to an upward or downward adjustment depending on the work secured for the West Leo over the remainder of the contract term, plus other direct costs incurred as a result of the early termination.

The semi-submersible had completed work at TEN, which was under dispute, and there was no drilling possible at Jubilee either while Tullow waits for approval of the development plan from the government.

Source: GhanaWeb