Songa Offshore, DSME in dispute over cost overruns

Songa Offshore, an offshore drilling contractor, and South Korea’s shipbuilder Daewoo Shipbuilding and Marine Engineering Co. Ltd. (DSME) are in a dispute regarding a construction contract for the Songa Equinox drilling rig built by DSME. 

Songa Offshore took delivery of Songa Equinox, the first rig in a series of four Category D rigs specifically built for and contracted to Statoil, in June 2015  and the rig arrived in Norwegian waters in October.

Offshore Energy Today reported in July 2015 that Songa Offshore had received notices of arbitration from DSME in respect of the construction contracts for the Cat D rigs. However, at that point DSME included no details regarding the dispute.

On November 16, 2015, Songa received claim submissions from DSME related to Songa Equinox in which DSME asserts a claim of $179 million, along with a request for repayment of liquidated damages in a total amount of $22 million. Songa says the claim that is asserted relates to alleged cost overruns and additional work in relation to Songa Equinox rig due to what DSME alleges were inherent errors and omissions in the design documents (often referred to as the FEED package).

“Songa Offshore has performed an initial review of the claim and does not consider that there is any substance to the claims asserted by DSME,” the company said on Tuesday.

Songa also said it was confident of its position, and added it was of the view that DSME was responsible for the delays and any attempt to recover cost overruns was of no merit due to the “turn-key” nature of the construction contract.

“Songa Offshore has obtained legal opinions from highly reputable law firms in the UK and Norway and from a Queen’s Counsel all of which confirm the company’s position,” the drilling contractor concluded.

Offshore Energy Today Staff