Norway's Sevan Marine issues arbitration notice to ONGC

Sevan Marine ASA has isued an arbitration notice to ONGC after the PSU encashed the bank guarantee submitted by the Norwegian firm over non-fulfillment of an ultra-deepwater drill ship charter-hire contract.

Oil and Natural Gas Corp (ONGC) had in June, 2008, charter-hired ultra-deepsea drillship Sevan Driller-II from Sevan Marine for three years at a dayrate of $524,900, translating into a total contract value of $569 million.

The newly built rig was to supposed to be deployed with ONGC by December 31, 2010, but the Norwegian firm did not keep to its commitment, forcing the state explorer to invoke the performance bank guarantee submitted by Sevan against the contract.

In a press statement, Sevan Marine said it has "issued a Notice of Arbitration to ONGC, informing ONGC of its intention to resolve certain disputes" relating to the June, 2008, order.

"In the arbitration, Sevan Marine is disputing ONGC's right to call on a bank guarantee for the sum of $15.9 million and/or to receive monies under the bank guarantee on the grounds that ONGC has suffered no loss and/or that any loss suffered by ONGC does not amount to the sum of the bank guarantee," the statement said.

It has also filed a petition with Indian courts seeking an order to restrain ONGC from invoking the bank guarantee until the dispute is resolved through arbitration.

ONGC officials said Sevan Marine has not been able to keep to its commitment for deploying Sevan Driller-II and is instead offering a different rig for a five-year period.

"This is major deviation from the offer they made to us in an international tender. If ONGC is to now accept its offer of a different rig for five years, it would amount to giving a multi-billion dollar contract on a nomination basis. This is not acceptable," an official said.

Minister of State for Petroleum and Natural Gas Jitin Prasada had on November 25, 2010, informed Parliament that ONGC hired Sevan Driller-II from Norway's Sevan Marine ASA for a three-year period, beginning December 31, 2010.

However, Sevan Marine's website shows that the rig has been leased to Brazalian national oil firm Petrobras SA on a six-year contract, which will commence from the second quarter of 2012.

The company had in two separate press statements in June, 2008, stated that it had received a firm order from ONGC for the charter-hire of an ultra-deepwater drilling unit.

"The drilling contract will have a fixed term of three years, starting from December 31, 2010," the statement had said.

As per the contract, Sevan Marine was to provide a newly built drilling rig to ONGC, based on its proprietary Sevan 650 design. The rig was supposed to have the most advanced drilling capabilities in the industry, with a capacity to drill in water depths up to 10,000 feet.

The Norwegian firm's partner in India is Jindal Drilling and Industries Ltd.