South Korea’s Daewoo Shipbuilding & Marine Engineering Co. (DSME) reached out-of-court settlement with its client and partner, receiving $25 million each from the European offshore energy company Dong Energy and Technip France SAS in fees to dismantle offshore drilling order that was cancelled close to its completion.
The Korean shipbuilder won the contract to build drilling platform from Dong Energy in February 2012 in a consortium with Technip. The contract was worth $560 million, of which $200 million was reserved for DSME in charge of designing and building upper structure.
The Danish state-run energy company terminated the contract in March 2016 and refused to pay penalty cost blaming the shipbuilder for the delay in delivery. DSME took the matter to International Arbitration claiming the order was cancelled by Dong amid fall in oil prices and demanded the client to share the cost of dismantling the facility.
DSME modified its strategy amid foggy chances of winning the lawsuit whose ruling was due in 2020. After thoroughly studying the domestic law, DSME found that Dong Energy still holds the ownership of the offshore platform and notified the Danish company that it could face criminal charges for violation of waste management act.
Dong Energy mulling selling of its crude oil and gas businesses concluded that a criminal litigation in Korea could have a negative impact on its sale plan and decided to pay $25 million to DSME. Technip agreed to share the responsibility in the breakdown of the order and paid $25 million.
Since the shipyard was paid 80 percent for the progress in building and another $50 million to dismantle the structure, the company would not have lost anything from the collapse of the deal and could even make money by selling the key components, an official said.
By Moon Ji-woong
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]