London-listed oil and gas industry service provider Petrofac is facing legal action from a Chinese yard after terminating a construction contract for its newbuild JSD 6000 deepwater multi-purpose offshore vessel.
Petrofac says the termination was due to issues with the vessel builder's performance, a claim the Chinese yard refutes.
Petrofac announced its first long-lead orders for the vessel, whose hull and marine systems were to be build at the Shanghai Zhenhua Heavy Industry Co. (ZPMC) yard in China, back in January 2014.
At the time, Petrofac said the JSD-6000 design vessel would be available for construction and installation activities in early 2017 and that the vessel, based on a customized Ulstein SOC 5000 design, was part of a "strategic evolution" of the business.
ZPMC says "it was regrettable that Petrofac unilaterally terminated the contract" and that it will "actively take all legal measure to defend its legitimate rights and interests, and will pursue the liability borne by Petrofac."
Analysts at Investec says, following Petrofac's decision "effectively to exit its Integrated Energy Services upstream assets," the cancellation of the JSD 6000 "would mark another strategic reversal, albeit not an unpopular one," as investors had worried about Petrofac's ability to compete with the bigger players - Technip, Saipem and Subsea 7 - with just one vessel, and that these concerns have been heightened by the low oil prices. It would bring the company back full circle, back to its roots as an onshore, MENA-focussed E&C contractor."
Ulstein said the vessel design has a combination of a 600-tonne Remacut S-lay system via a centre firing line below main deck, and a 2000-tonne IHC EB J-lay system via a moonpool. "This double deck configuration, a distinctive feature in Ulstein Sea of Solutions designs, allows for a large, unobstructed deck area and below deck pipe fabrication," said Ulstein in 2014.
It was then Ulstein's third customized version of the ULSTEIN SOC 5000 design, after the Seven Borealis and Aegir, both already in operation.
Other vessel contracts awarded in January 2014 were:
Investec says Petrofac was due to spend about US$0.8 billion on the vessel, with about $300 million spent to date and another $100 million commitments, mainly on equipment.
Ayman Asfari, Group Chief Executive, said: “It is regrettable that it has become necessary for us to take this decision, and the board is now reviewing its options.”
Options could be moving the hull construction contract to another shipyard, put equipment bought to date into storage and revisit hull construction at a later date, or cancel the vessel entirely, suggests Investec.
Image: Petrofac's JSD-6000 design.