Arbitration Tribunal Delivers Verdict: Hanwha Triumphs in Deepwater Drillship Dispute

Credit: Northern Drilling
Credit: Northern Drilling

An arbitration tribunal has delivered a verdict in a drillship order cancellation case involving offshore drilling contractor Northern Drilling and Daweoo Shipbuilding Marine and Engineering (now known as Hanwha Ocean), ruling in favor of Hanwha.

Billionaire John Fredriksen-owned offshore drilling company Northern Drilling canceled the West Aquila and West Libra drillship orders with South Korea's Daewoo Shipbuilding & Marine Engineering in 2021, citing delay of deliveries as well as a repudiatory breach of contract, and said it would seek a refund for installments paid. It also said that "if this claim is disputed, the company will seek an award via London arbitration."

Northern Drilling had signed agreements with DSME back in May 2018, to buy the two newbuilding 7th generation DP3 and ultra-deepwater drillships from DSME for $296 million each.

The two drillships were originally ordered in 2013 by Seadrill. Seadrill then in 2016 agreed with DSME for the deliveries to be delayed for 2018 and 2019, but it then in March 2018 canceled the contracts.

The ruling

In a statement on Monday, announcing the arbitration tribunal ruling, Northern Drilling said: Today, the company has received the arbitration awards from the tribunal, which have been found in favor of Hanwha." 

Northern Drilling said that the tribunal had dismissed its claims and that Hanwha’s claims against its West Aquila Inc. and West Libra Inc. subsidiaries - through which it had ordered and then canceled the rigs - for losses arising from the terminations, interest, and costs will be determined at a future hearing.

"West Aquila Inc. and West Libra Inc. are disappointed with the Tribunal's determination and are currently considering whether to appeal. We will revert with further information once a decision on whether to appeal has been made," Northern Ocean said.

These were not the only drillship-ordered cancellations by Northern Drilling with DSME. Back in October 2019, Northern Drilling canceled a resale contract for the 7th generation ultra-deepwater drillship West Cobalt, which had been scheduled for delivery from DSME in 2021.

Northern Drilling said at the time the deal had been canceled for "various reasons, including repudiatory breach of contract by DSME".

DSME then challenged Northern Drilling's move, and according to available info, it in December 2019 purported to terminate the contract owing to the drilling firm's alleged failure to pay the remaining installments and for its breach of contract.

The yard reportedly said at the time it would pursue its legal and contractual rights in full, including its right to recover substantial damages. 

Worth noting, the West Aquila drillship, mentioned earlier, has since been acquired by the offshore drilling company Transocean and renamed to Deepwater Aquila. Transocean recently said it had secured a three-year contract for the newbuild ultra-deepwater drillship "a national oil company" for work offshore Brazil. 

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