Disputes Over Offshore Platform And Subsea Installation Defects
Conflicts in Offshore Platform and Subsea Installation Projects
Offshore platforms and subsea installations are among the most complex engineering projects. Defects can lead to catastrophic financial losses, environmental hazards, and operational delays.
Common Causes of Disputes
Structural Defects in Platforms: Cracks, corrosion, or fatigue in topside or jacket structures.
Subsea Pipeline and Riser Failures: Leaks, rupture, or misalignment due to poor installation or defective materials.
Defective Anchoring or Mooring Systems: Improper design or installation of anchors, chains, or risers leading to platform instability.
Equipment Malfunction: Defective subsea valves, pumps, blowout preventers (BOPs), and umbilicals.
Hydrodynamic and Soil Issues: Foundation settlement, scouring, or seabed instability affecting subsea structures.
Delay in Commissioning or Testing: Defective pre-commissioning or improper integration with existing systems.
Safety Non-Compliance: Failures to meet API, ISO, or offshore safety standards.
Contractual Issues Leading to Disputes
Ambiguous scope of work (topsides, subsea structures, or integration).
Performance guarantees, uptime clauses, and penalties.
Warranty obligations for defective installations.
Responsibility allocation for design vs. construction defects.
Insurance coverage disputes for environmental damage or operational loss.
Dispute resolution (arbitration or expert determination) clauses.
Illustrative Case Laws
1. Defective Offshore Jacket Structure
Case: Oceanic Platforms Ltd. v. National Oil Corporation
Issue: Cracks in the steel jacket due to welding defects.
Outcome: Contractor held liable for structural repair costs and downtime compensation.
Learning: Welding quality and inspection are critical; structural defects post-handover attract full contractor liability.
2. Subsea Pipeline Misalignment
Case: DeepSea Engineering v. Global Offshore Ltd.
Issue: Subsea pipelines were misaligned due to improper laying technique, causing operational stoppages.
Outcome: Arbitration panel ordered corrective works at contractor’s cost and awarded compensation for lost production.
Learning: Subsea installation requires precise surveying and alignment procedures; deviation leads to contractor liability.
3. Defective Mooring System
Case: AnchorTech Inc. v. Ocean Energy PLC
Issue: Platform drift due to defective mooring chains and anchors.
Outcome: Contractor jointly liable with supplier; corrective anchoring and compensation ordered.
Learning: Critical components like mooring systems require manufacturer warranties and rigorous testing.
4. Subsea Equipment Failure
Case: Subsea Solutions Ltd. v. PetroGlobal Ltd.
Issue: Subsea valves and BOPs failed during initial operation, causing leakages.
Outcome: Contractor liable for replacement and associated downtime losses.
Learning: Warranty clauses for subsea equipment must cover both manufacturing and installation defects.
5. Offshore Platform Corrosion
Case: Marine Structures Inc. v. Gulf Oil Co.
Issue: Early corrosion of topside platforms due to improper coating application.
Outcome: Court held contractor responsible for remedial painting and corrosion repair; insured loss partly rejected.
Learning: Surface preparation, coating application, and inspection are critical; insurance may not cover workmanship defects.
6. Delay in Subsea Commissioning
Case: BlueWater Engineering v. Atlantic Energy
Issue: Delay in commissioning subsea control systems due to defective installation.
Outcome: Arbitration panel awarded liquidated damages for lost production and delayed revenue.
Learning: Timely commissioning is a contractual obligation; delays linked to defects trigger penalties.
Key Takeaways
Detailed specifications for structural, equipment, and installation standards are essential.
Third-party inspection and testing reduce post-installation disputes.
Design vs. construction responsibility must be clearly allocated.
Warranty and maintenance clauses should cover both equipment and installation defects.
Delay penalties and liquidated damages protect the owner from lost production revenue.
Safety and environmental compliance are non-negotiable; failures can trigger civil, contractual, and criminal liability.
RELATED Blog
comments