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…Tullow examines options, including appeal
A London judge has ordered Tullow Oil to pay rig owner Seadrill Ghana Operations Limited around $254 million, on grounds that Tullow was wrong to end a rig contract in Ghana based on force majeure over a maritime dispute.
Tullow cancelled the contract for Seadrill’s West Leo rig in December 2016 after The International Tribunal for the Law of the Sea (ITLOS) set a drilling moratorium on the Tweneboa-Enyenra-Ntomme (TEN) offshore oil and gas field, which is located in waters then claimed by both Ghana and Ivory Coast.
ITLOS last year ruled in favour of Ghana, allowing Tullow, the lead operator of the project, to resume drilling.
Tullow is expected to pay these fees within the next 14 days, with Tullow being liable for a net amount of approximately $140 million, which compares with the provision of $128 million made in the 2017 Annual Report and Accounts.
In a statement issued shortly after the ruling, the company said, “Tullow is disappointed with the decision and maintains the view that it was right to terminate the West Leo contract for force majeure.”
Tullow to appeal judgement
Tullow said it would examine its options, including seeking leave to appeal the judgement.
Kosmos Energy, Anadarko Petroleum Corporation, Ghana National Petroleum Corporation and PetroSA also hold stakes.
TEN partners to pay
With Tullow’s 47 per cent stake in TEN and its duty to pay costs for Ghana National Petroleum Corporation’s (GNPC) stake, the British company expects to pay around $140 million net, it said.
It expects to get the rest of the money back from its TEN partners.
Tullow said last week it had set aside $128 million for the dispute with Seadrill.
Meanwhile, Kosmos is in a separate dispute with Tullow over the contracting of the rig at the International Chamber of Commerce, which might result in Tullow having to pay the fees for Kosmos’ 20 per cent stake in the field.
A decision in the Kosmos case is due shortly. It would cost Tullow around $50 million should it lose.
Tullow’s shares dropped as much as 4.3 per cent yesterday, but recovered to trade broadly flat.
Boosted by its Ghana output, Tullow last week raised its 2018 production outlook to 86,000-92,000 barrels of oil per day.
Tullow issues force majeure to Seadrill on October 3, 2016
Tullow issued a notice of force majeure to Seadrill partners on October 3, 2016 for the West Leo semi-submersible. The unit was carrying out work on TEN development.
Seadrill disputes force majeure claim by Tullow
A notice from Seadrill said it disputed the force majeure claim from Tullow, and warned that it would “enforce all its rights as per the contract and governing law”.
The role of ITLOS injunction
Tullow was said to have halted its contract on the basis that work on the TEN development could not continue, owing to an arbitration case between Ghana and Cote d’Ivoire on the disputed border.
While the case was being considered, Tullow was prevented from drilling any new wells, but was allowed to work on those already drilled.
Seadrill, though, sees it differently. The company said that there were other fields within Ghana where the West Leo has worked previously and that are not subject to arbitration proceedings.
“However, as part of its claim, Tullow has asserted that a further drilling moratorium applies to these additional fields, although no satisfactory justification (for this action) has been provided,” the rig owner said.
According to Seadrill’s quarterly update at the end of September 2016, West Leo was delivered from the shipyard in 2012 and was operated under a contract with Tullow, due to expire in July 2018.
The semi-submersible earned $234.7 million for Seadrill in 2015, with a contracted dayrate of $605,000 – the third highest in the company’s fleet.
The driller claims that in the event of termination for convenience, Seadrill partners are entitled to an early termination fee of 60 per cent of the remaining contract backlog.
The amount is subject to an upward or downward adjustment depending on the work secured for the West Leo over the remainder of the contract term, plus other direct costs incurred as a result of the early termination.
The semi-submersible had completed work at TEN, which was under dispute, and there was no drilling possible at Jubilee either while Tullow waited for approval of the development plan from the government.
Source: Elvis Darko || The Finder