Saipem's olive branch finds no takers at GSPC

Vol 19, PW 16 (21 Apr 16) People & Policy

Italian driller Saipem's offer to slash its claim by half from $143.45m to $70m is not enough to satisfy GSPC in a longstanding eight-year dispute over its contract for jack-up Perro Negro 3 - a rig with special significance for GSPC.

Perro Negro 3 was the first rig contracted by GSPC to drill at KG-OSN-2001/3. She reached the Deen Dayal West field on August 31, 2004 and struck gas at her third well KG-8 in 2005.

But GSPC is not letting sentimentality interfere with its judgement and has coldly issued a counterclaim of $36.9m against Saipem. The dispute centres on Saipem's bold demand of a higher day rate for additional work carried out between January 2005 and October 2009 under the contract signed on April 1, 2004.

But GSPC argues the initial $61,800 day rate agreed was valid until 12 wells were drilled irrespective of the time it took to drill them. Saipem launched arbitration proceedings on March 31, 2008 before a three-member panel of Justices SP Bharucha, AM Ahmadi and BN Srikrishna and to this day claims the contract was time-based and the $61,800 day rate valid for only 600 days, after which it had the right to raise rates.

Saipem was provoked into making its demand after seeing the handsome rates paid by GSPC for jack-up Atwood Beacon in 2006 hired at $112,000/day and Deep Driller-1 in 2008 hired at $195,000/day.