BP and Kosmos Energy are seeking “maximum recoverable damages” of about $535 million in binding arbitration with contractor McDermott International over a claim it failed to meet contractual obligations in installing subsea pipelines for a gas project liquefied natural gas estimated at $4.8 billion in Africa.
Kosmos flagged the dispute in its fourth-quarter earnings call last month, estimating its share of recoverable damages at $160 million related to the Greater Tortue Ahmeyim natural gas project off the coast of Mauritania and Senegal. BP sent McDermott a notice of claim and began the process under an agreement to recoup the losses incurred, Kosmos said.
The subsea construction project was awarded to McDermott and Baker Hughes in 2019, valued at the time between $500 million and $750 million, and included subsea pipelines, risers, flowlines and subsea production system equipment.
According to two media reports, McDermott stopped work last year as part of a long-running contract dispute over non-payment. BP replaced McDermott’s team in October with Dutch contractor Allseas Energy and Italy-based contractor Saipem SpA to complete the subsea project including the installation of about 75 km of two 16-in. export pipes in water depths between 1,500 and 2,800 m, and four 10-in. internal lines of corrosion-resistant alloy at a depth of 2,800 m.
Work began in December with the construction vessel Pioneering Spirit, which Allseas claims is the largest in the world.
Kosmos CEO Andrew Inglis said on the Feb. 26 earnings call that the arbitration is expected to take place in the second quarter with a decision by mid-year. He also said the issue should not slow down work on the project. “Significant progress has been made in the installation of internal flow lines and underwater structures. Work restarted in the fourth quarter of last year and is expected to be completed by the end of the second quarter of 2024, the company told investors.
Neither the owners nor McDermott would comment on the arbitration.
An industry source with knowledge of the matter said such contractual disputes do occur and the two companies will engage in discussions to reach a resolution. “It has been known for months that BP and McDermott ended the Tortue contract,” the source told ENR. “Everyone has different views on performance and breach of contract.”
In accordance with Bloomberg, BP and Kosmos are also involved in arbitration over unspecified purchase agreements.
McDermott was using his high-tech vessel Amazon which, according to media reports, had problems with automated processes during the highly complex and fast-paced project, which slowed down the pipe-laying work and would delay the next job contracted from the vessel on a Shell project in the Gulf of Mexico.
The Tortue project is located between Mauritania and Senegal and has a 30-year production potential with 15 trillion cubic feet of potentially recoverable gas resources.
Maritime and offshore publishing Splashes 24 hours a day reported that the development “had consequences for the oil and gas industry”, adding that delays and disputes “could have far-reaching consequences”.
