UMW-Frontier rig row: Arbitration hearing starts in April

Malaysian offshore driller and oilfield services provider UMW has learned the date of the arbitration hearing aimed at resolving its spat with Frontier Oil Corporation related to a rig contract award signed in 2014.

The two companies in 2014 signed a contract under which UMW was to provide a jack-up drilling unit, UMW NAGA 7, and other related services to FOC, for on FOC’s SC50 Block offshore the Philippines.

UMW says the contract had stipulated that Frontier was to have arranged for the issuance of a bank guarantee of $5 million and an advance payment of $5 million within the time stipulated in the contract, ie; on or before  December 2015.

The Malaysian driller said that Frontier then “failed to, refused to and/or neglected to arrange for the said bank guarantee and advance payment,” despite repeated reminders.

According to a 2016 article by the Philippine Star, it was UMW who terminated the rig contract after Frontier Oil attempted to negotiate lower rates due to the falling oil prices.

Arbitration notice

UMW Offshore Drilling then in early 2015 served a notice of arbitration on Frontier Oil Corporation to seek, among others, an award for damages and compensation for all losses arising from what UMW described as FOC’s breach of contract “but not limited to the early termination fee amounting to $19.2 million.”

According to UMW, in August 2015, FOC filed a statement of defense saying that UMW was not entitled to the early termination fee, damages, cost, interest or any other sums. FOC at the time did not make any counterclaim against UMW.

FOC in counterattack

However, a year later, UMW has said, FOC served an amended statement of defense and counterclaim seeking its alleged loss and damages on account of alleged non-performance and/or breach.

FOC is seeking $20 million for an alleged loss of revenue or value that FOC would have obtained had UMW not breached the contract, and damages reflecting an alleged loss of the extended well test value in the sum of $9.70 million.

Furthermore, according to UMW, FOC has asked for a compensation for the cost of wasted expenditure of $1.36 million; liquidated damages in the sum of $3.84 million; and interest and costs, fees and expenses associated with the arbitration.

UMW then served its amended response to these claims in October 2016 and April 2017.  FOC responded by filing a revised counterclaim on June 2017 and UMW then again submitted revised response in July 2017.

In a statement on Friday, March 30, 2018, UMW said the arbitration hearing was scheduled to be conducted in Singapore from  April 2, 2018, to April 6, 2018.

“The company will make further announcements on any material development on this matter,” it added.

Offshore Energy Today Staff