Energy Project
McDermott International and BP Team Arbitrate $535M LNG Site Dispute
Gas project off Mauritania and Senegal is still set to produce gas this uear, owners BP and Kosmos Energy sau.
Image courtesy of BP
BP and Kosmos Energy are seeking “maximum recoverable damages” of about $535 million in binding arbitration with contractor McDermott International over a claim that it failed to meet contract obligations on subsea pipeline installation for an estimated $4.8 billion liquefied natural gas project off Africa.
Kosmos noted the dispute in its fourth-quarter results call last month, estimating its share of recoverable damages at $160 million related to the Greater Tortue Ahmeyim natural gas project offshore of Mauritania and Senegal. BP served McDermott with a claim notice and initiated the process under an agreement to recover 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 including subsea pipelines, risers, flowlines and subsea production system equipment.
According to two media reports, McDermott paused work last year as part of a long-running contract dispute over non-payment. BP replaced the McDermott team in October with Dutch contractor Allseas Energy and Italy-based contractor Saipem SpA to complete the subsea project including installation of about 75 km of two 16-in. export pipelines in water depths between 1,500 m and 2,800 m, and four 10-in. corrosion-resistant alloy infield lines in depths of 2,800 m.
Work began in December using the construction vessel Pioneering Spirit, which Allseas claims is the world’s largest.
Kosmos CEO Andrew Inglis said on the Feb. 26 earnings call that arbitration is expected to take place during the second quarter with a decision mid-year. He also said the issue should not slow project work. “Significant progress has been made on the installation of the infield flowlines and subsea structures. Work restarted in the fourth quarter last year and is set to finish at the end of the second quarter of 2024, the company told investors.
Neither the owners nor McDermott would comment on the arbitration.
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An industry source with knowledge of the matter said such contract disputes happen, and that the two companies will engage in discussions to reach a resolution. “It has been well-known for months that BP and McDermott ended the Tortue contract,” the source told ENR. “Each has different views on performance and breach of contract.”
According to Bloomberg, BP and Kosmos are also involved in arbitration over unspecified offtake agreements.
McDermott was using its high-tech Amazon vessel that media reports said had problems with automated processes during the highly complex, fast-tracked project, which slowed pipelaying work and would delay the vessel’s next contracted work at 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 cu ft of potentially recoverable gas resources.
Maritime and offshore publication Splash 24/7 reported that the development “sent ripples through the oil and gas industry," adding that delays and disputes "can have far-reaching consequences.”
