New vessels, rigs & upgrades

Expected construction schedules for 46 newbuilds and conversions. Source: R&B Falcon [5,722 bytes]. SCORE record largest monthly drop since 1994 [82,389 bytes] Speculation is growing that delivery delays and major cost overruns could be giving operators a convenient exit from high dollar, long-term vessel contracts. Although no contracts have been officially terminated, as of this writing, operators have begun asking for accountability with respect to these inefficiencies.

Marshall DeLuca
Houston

Will operators exit drilling contracts?

Speculation is growing that delivery delays and major cost overruns could be giving operators a convenient exit from high dollar, long-term vessel contracts. Although no contracts have been officially terminated, as of this writing, operators have begun asking for accountability with respect to these inefficiencies.

The most notable example of this problem was the cancellation of Smedvig/Navion's West Navion II drillship in August due to major cost overruns. Cancellation cost Smedvig $90 million. Recently, more and more cancellation problems have begun to materilize.

  • Saga Petroleum recently negotiated an $18.2 million settlement from Keppel FELS, Singapore due to late delivery of the Varg production ship. The Varg was delivered seven months late and licensees in the project will be credited a daily compensation by Keppel FELS. Keppel FELS will also be compensated for changes made during the construction period. However, this overrun only pushed the cost of the vessel up to $218 million, less than 5% from the originally contracted price.
  • Esso Norway and Smedvig are going to court over the Balder FPU. Esso is attempting to terminate the sales and operations contracts for the vessel due to major cost increases. Smedvig filed a claim disputing Esso's claims, saying that Esso has no legal basis for termination of the contract. Esso submitted a counter-claim against Smedvig for $540 million to recover costs incurred by Esso in completion of the vessel as well as consequential damages from delayed production startup. The legal complaints are under the jurisdiction of Norwegian law and are expected to be heard in the first half of 2000.
  • On the drilling rig side, rumors have begun circulating that R&B Falcon may be negotiating with Texaco for the cancellation of a 3-5 year drilling contract off West Africa for the conversion of the Peregrine VIII drillship. Costs on the project have jumped $105 million and delivery has been pushed back from the second to the fourth quarter of 1999. R&B Falcon declined comment. Under the contract with Texaco, R&B Falcon will be subject to a $3,000/day late delivery penalty.

On the positive side, R&B Falcon will receive the Deepwater Pathfinder on time, and the advancement of delivery dates on the Deepwater Frontier and Deepwater Millennium drillships by Samsung. R&B Falcon International President Andrew Bakonyi speaking as part of a panel at the IADC Annual Meeting in New Orleans, projected average industry cost and schedule overruns of 25-30%.

Ruby Princess converted

The 140,905-dwt tanker Ruby Princess has been successfully converted to an FPSO. Keppel Shipyard of Singapore completed the conversion for Nortrans Offshore on time. The vessel is on its way to Petronas Carigali and PetroVietnam's Ruby Field off Vietnam. The Ruby Princess will be operated by Nortrans and serve as a base for processing and storage of crude oil and as a mooring and loading terminal for tankers for export.

This is the third tanker-FPSO conversion Keppel has performed for Nortrans. Keppel delivered the Endeavor FPSO in April of last year and the Petroleo Nautipa in April of this year.

Naming ceremonies

Naming ceremonies have been held for the ?sgard A oil production ship, the Shelf 5 semisubmersible, and the jackup production platform for Statoil's Siri Field in the Danish North Sea.

Statoil's Åsgard A was named by Norwegian Petroleum Minister Marit Arnstadat at the Aker Stord yard south of Bergen in Norway. The final outfitting of the ship is scheduled to be completed this month and will begin production from the Halten Bank Field in February.

The Shelf 5 was re-christened the Istiglaliyet (meaning Independence) by Heydar Aliyev, President of Azerbaijan. Ceremonies took place at the Kaspmornefteflot yard in Baku, Azerbaijan. The rig left the yard in mid-September for testing and has begun extending an exploration well on BP's Shah Deniz prospect originally started by the Dada Gorgud.

The three-legged Siri jackup production platform was named at a ceremony held in Stavanger. The platform was built at the Kvaerner Rosenberg yard and was towed out last month following testing of the legs. The platform will be located on the Siri Field in Danish block 5604 and is expected to come onstream this month.

Petrobras acquires second pipelayer

Petrobras has concluded a provisional agreement with DSND for the Kommander 3000 pipelaying vessel. This is the second contract between the two companies for a pipelaying vessel. The first vessel, Lochnagar, was agreed to at the end of 1997 and is presently on its way to its first assignment with Petrobras in Brazilian waters following an extensive refit.

The Kommander 3000 will also undergo a refit to begin in January in a European shipyard. This refit will be less extensive than that of the Lochnagar and is scheduled for delivery in the second quarter of 1999.

R&B Falcon adds to deepwater fleet

R&B Falcon and Vastar have executed a letter of intent for a three-year drilling contract which includes the provision of the RBS8-D, a new-generation ultra-deepwater dynamically positioned semisubmersible. The RBS8-D will be of similar design to the RBS6 semi, now designated the RBS8-M (8 corresponding to the variable deck load and M meaning moored), under construction for Shell Deepwater Development. Vastar's vessel will have a variable deck load of 8,000 metric tons and will be initially outfitted for 8,000 ft water depth operation in the Gulf of Mexico. The transaction is subject to a later agreement on a definitive drilling contract that is expected to generate revenues of about $220 million over a three-year term. Delivery is expected in the fourth quarter of 2000.

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