Marco Polo Marine stands firm against SembMarine in ongoing contract spat

SINGAPORE - Marco Polo Marine has rebutted Sembcorp Marine's claim that it is in a potential repudiatory breach of contract, the latest exchange in a dispute that is unfolding between the two offshore and marine companies in Singapore.

In a statement issued on Monday (Nov 30), Marco Polo cited the defects found on the rig its unit Marco Polo Drilling ordered from SembMarine's PPL Shipyard as grounds to terminate the contract and request for refund.

Seventy cracks were found on all three legs of the new rig PPL Shipyard is building for Marco Polo Drilling in its first test, and more than 180 cracks were found in the partial second test, Marco Polo Marine said, adding that SembMarine did not deny the existence of these defects in its announcement on Nov 25.

In that announcement last week, SembMarine said Marco Polo Marine' move to terminate the contract is to avoid its payment obligation. PPL Shipyards will have enough time to fix the defects, SembMarine stressed, adding that the termination "is wrongful and without any justification whatsoever", and the group is seeking the payment due.

In response, Marco Polo Marine refuted these allegations, and called the cracks and defects found on the rig over two rounds of testing "wholly unacceptable", adding that Marco Polo Drilling is hence entitled to terminate the contract.

"The consequence of termination is that Marco Polo Drilling is discharged from its obligations under the rig construction contract and is under no further obligation to perform the same. This includes a discharge of its obligation to make any further payment of the contract price or any other sum under the contract to PPL," Marco Polo Marine added.

Marco Polo Drilling is now trying to mediate with PPL Shipyards as the dispute progressed further after PPL Shipyards refused to refund.

"Should PPL refuse to mediate, Marco Polo Drilling will proceed to commence arbitration against PPL," Marco Polo Marine said.

The dispute came as Singapore's marine and offshore industry found itself severely hit by the production struggles that followed the slumping of oil prices.

The cancellation or deferment of orders has affected both Sembcorp Marine and Keppel Corp, both of which have reported poor performance in recent quarters.