BW blocked from removing FPSO Umuroa from New Zealand field

FPSO operator BW Offshore’s efforts to remove its FPSO Umuroa from a field offshore New Zealand following last year’s contract termination have been hindered by legal complications.

The FPSO Umuroa had been operating for Tamarind Resources on the Tui field, located offshore New Zealand, since 2007.

In October 2019, Tamarind terminated the FPSO’s contract, effective end of December that year. Later in October, BW said it had found uncertainties related to payment of outstanding overdue hire and payment of future hire by Tamarind Resources for the FPSO Umuroa.

BW said it would seek to recover all outstanding hire from Tamarind Resources and its parent company under the provisions of the existing contracts.

BW hoped to find redeployment opportunities for the FPSO and expected to disconnect it from the field and sail away to Singapore by the end of March 2020.

However, BW Offshore has as of 9 April 2020 not been able to disconnect the FPSO Umuroa from the Tui field.

Following the termination of the FPSO lease and operate contract, BW Offshore began preparatory work to start demobilisation. In October 2019, BW Offshore commenced discussions with regulatory agencies regarding disconnection in accordance with a 2017 ruling (2017 Ruling) of the Environmental Protection Authority (EPA) of New Zealand.

The 2017 Ruling allows lay down of risers on the seabed for the FPSO to safely disconnect and sail away. The risers are the responsibility and property of TTL and BW Offshore claims it has no responsibility related to this equipment. TTL is insolvent and in liquidation and is currently not able to execute disconnection activities under the charter contract.

BW considers that the best and safest approach for disconnection is to follow the procedure in the 2017 Ruling and cap and lay down the risers on the seabed pending removal of the risers as part of full-field decommissioning, which is not a BW Offshore responsibility, the company emphasized.

In March 2020, the EPA imposed abatement notices to prevent BW Offshore from disconnecting the risers in accordance with the 2017 Ruling on the basis that circumstances have changed since the 2017 Ruling was granted. BW Offshore challenged the imposition of the abatement notices in the Environment Court and the court lifted these notices. The EPA appealed this decision and on 6 April the High Court of New Zealand decided that the abatement notices should remain in place.

“The company is taking advice on whether to appeal the recent High Court decision, which contains certain inaccurate statements and gives the impression that BW Offshore was in a partnership or joint venture with TTL. This is not the case. BW Offshore was a service contractor to TTL and has no ownership interest in the field”, BW stated.

Due to uncertainty whether BW Offshore may disconnect using the 2017 Ruling, combined with the COVID-19 situation and the onset of the southern hemisphere winter, the company has decided to plan for a lay-up of the unit on the field until further clarification can be received from authorities.

BW Offshore will continue to work with the New Zealand authorities to develop a new plan for demobilisation. A significant portion of the estimated $ 20 million demobilisation cost has been incurred to date as preparatory work has been done and support vessels for demobilisation had been mobilised prior to abatement notices being imposed by the EPA.