Erin Energy hits Bumi with force majeure notice

Malaysian FPSO owner Bumi Armada is taking legal action against Erin Energy following the receipt of a force majeure notice, asking for a shutdown of an FPSO which operates on Erin’s Oyo field offshore Nigeria. 

Last week, on April 11, 2018, Bumi Armada Singapore received a notice from Erin Petroleum Nigeria Limited advising of a purported “Force Majeure Event” and requesting immediate, orderly shutdown of operations on the FPSO Armada Perdana.

Bumi Armada had also received a notice of seizure/attachment of goods from a third party informing that the entire crude oil produced and to be produced and stored in Armada Perdana has been seized/attached by a writ of attachment of the Federal High Court, Lagos, in relation to legal proceedings to which the Bumi Armada group is not a party.

The company had sought clarifications from Erin but Erin has not responded despite numerous reminders, Bumi said in a statement on Tuesday, April 17.

Bumi Armada maintains that the suspension of provision of services under the bareboat charter party contract and operational and maintenance services contract respectively remains in place and Erin is not relieved from its obligation to make full payment of all payments due to the Malaysian company under the contracts.

Force majeure ‘wrongful’

Bumi believes that the purported force majeure declaration is wrongful and the company is reviewing its legal options, including starting legal proceedings against Erin, to uphold the contractual rights under the contracts.

The estimated financial impact of credit risk recovery for Bumi Armada to the results for the financial year ending December 31, 2018, is approximately RM30 million ($7.7M).

As a reminder, Bumi Armada suspended the bareboat charter and operations and maintenance contracts with Erin Energy for the FPSO Armada Perdana last June due to longstanding delays in the bareboat charter payments to Bumi Armada, as well as irregular payments on the operations and maintenance contract. The vessel owner then in August allowed the oil company to flow the produced oil into the FPSO cargo tanks despite outstanding payments.

Then, in October, Bumi allowed Erin Energy to flow its oil from the Oyo field into the Armada Perdana FPSO cargo tanks and a one-off cargo offtake in order to enable debt payment, but the suspension of services under both the operational and maintenance service contract and bareboat charter party contract remained in place.

In another twist of events, Erin Energy in March responded to some media reports contending that a Nigerian court had ordered the “take over” of the Oyo oil field. Erin firmly denied the allegations and added that a party attempted to enforce a writ against certain Erin Energy equipment. The writ in question was based on a court order pertaining to parties unrelated to Erin Energy, and a Nigerian court has subsequently ruled that actions taken to enforce the writ against Erin Energy were an abuse of legal process.

Offshore Energy Today Staff