Client scraps Vard orders

Shipbuilder to seek damages after Petrobras axes two deals for LPG carriers

A firm that ordered two liquefied petroleum gas (LPG) carriers from a unit of shipbuilder Vard Holdings has terminated the contracts, it was announced yesterday.

The vessels were the last in a series of eight LPG carriers contracted in June 2010 by Brazilian company Petrobras Transportes.

Vard did not give a contract value for the two cancelled vessels, but the combined value for the series of eight carriers was US$536 million (S$757 million).

Construction of the last two carriers, which had been ordered from Vard's 50.5-per-cent-owned Vard Promar, was at a very early stage.

Vard said it intends to claim compensation from Petrobras Transportes for damages in relation to the terminated contracts. It is also reviewing its overall exposure to the Brazilian market.

It added that the termination is not expected to have a material effect on its earnings per share in the financial year ending on Dec 31.

Contract terminations and delivery deferments are becoming more frequent amid tough times in the oil and gas sector.

Rigbuilder Sembcorp Marine announced earlier this month that its Jurong Shipyard unit had reached a "standstill" agreement with North Atlantic Drilling to defer delivery of a rig until next June.

That announcement came shortly after news of a contractual dispute between SembMarine and Marco Polo over a US$214.3 million rig construction contract broke.

SembMarine also said earlier this month that it expected to post its first quarterly loss since 2003, along with a "significant decline" in net profit for the full year, owing to the challenging operating environment, as well as to customers deferring or looking to defer rig orders.

Vard shares closed down two cents, or 7.69 per cent, at 24 cents yesterday.

A version of this article appeared in the print edition of The Straits Times on December 15, 2015, with the headline 'Client scraps Vard orders'. Print Edition | Subscribe