Transocean Drilling U.K. Ltd v Providence Resources Plc and Another
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr Justice Popplewell |
| Judgment Date | 19 December 2014 |
| Neutral Citation | [2014] EWHC 4260 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | 2012 FOLIO 1560 |
| Date | 19 December 2014 |
[2014] EWHC 4260 (Comm)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
7 Rolls Building, Fetter Lane
London, EC4A 1NL
The Hon. Mr Justice Popplewell
2012 FOLIO 1560
Lionel Persey QC & Lucy Garrett (instructed by Ince & Co LLP) for the Claimant
John McCaughran QC & Laurence Emmett (instructed by Herbert Smith Freehills LLP) for the Defendant
Hearing dates: 9, 13–16, 20, 21, 23, 27–30 October 2014
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
This is a dispute about the financial consequences of delays which occurred to the drilling of an appraisal well in the Barryroe Field off the south coast of Ireland between November 2011 and March 2012. The Claimant ("Transocean") provided the rig GSF Arctic III ("the Rig") to the Defendant ("Providence") pursuant to a drilling contract dated 15 April 2011 ("the Contract"). The Rig is a six-leg semi-submersible drilling unit built in 1984. The delays occurred following problems with the Blow Out Preventer (BOP) stack. The main problems arose out of (1) a stinger misalignment with the Blue POD receptacle on the lower BOP and (2) the inoperability of the wedgelocks on the lower BOP due to a plug blowing out. Additionally there were problems caused or allegedly caused by (3) a mini collet gasket falling out, (4) an issue with the upper annular preventer and (5) other control POD problems.
The delays occurred between 18 December 2011, when operations were first interrupted as a result of Blue POD misalignment problems, and 2 February 2012 when the Rig was in a position to resume operations from the same point as when work was suspended on 18 December 2011. This period was described by the parties as "the Disputed Period". Transocean claims remuneration of US$13,035,083.97 and £3,516,758.45 in accordance with the rates provided for in the Contract together with reimbursables. Only a minority of this arises in respect of the Disputed Period. Providence contends that (1) in respect of the remuneration claim for the Disputed Period, it is not liable for periods of delay caused by breaches of contract by Transocean and (2) in respect of most of the balance of the remuneration claim, it is entitled to set off its counterclaim, which is for wasted costs comprising sums payable to personnel, suppliers and service providers for the periods of delay within the Disputed Period caused by Transocean's breaches of contract and/or misrepresentation. Even on Providence's case, there is a balance due to Transocean of something over US$1 million.
The BOP equipment
The BOP stack, designed and built by Cameron International Corporation ("Cameron"), provides well control by preventing formation fluids reaching the surface through the well bore. It comprises two sections. The upper section is the Lower Marine Riser Package (LMRP); the lower section is the lower BOP, sometimes referred to simply as the BOP (which is also an expression sometimes used to describe the combined stack). The lower BOP is latched directly to the wellhead which is cemented to the seabed by the cement pumped into the annular gap between the sections of casing and the drilled hole. The LMRP and BOP are hydraulically operated and controlled from the surface through Points of Distribution (PODs). There are two PODs which are located on the LMRP, coloured blue and yellow. Each is sufficient to control the entire hydraulic system necessary to operate the whole BOP stack. In other words, having two PODs allows for 100% redundancy. The complete BOP stack is about 13.5 m high and weighs about 200 tons.
The well control mechanisms within the stack comprise (1) preventers and (2) choke and kill lines. The preventers come in one or other of two forms, namely ram preventers and annular preventers. In simple terms the ram preventers close the hole by rams moving to close off the pipe (or in the case of a shear ram, to shear the pipe); annular preventers seal the well bore by closing the drill pipe using an elastomer packing like a doughnut. When the ram preventers are deployed they are locked tight by wedgelocks, whose function is to hold them in place mechanically so as not to rely on the maintenance of hydraulic pressure. The BOP stack on the Rig had six preventers. On the LMRP there was the upper annular preventer. On the lower BOP there was the lower annular preventer, below which sat four ram preventers. The choke and kill lines lead to valves which may be used to prevent the escape of formation fluids. Kill lines seek to cut off fluids flowing out of the well bore, whereas choke lines are used to enable fluids to be pumped into the well bore to achieve the same purpose.
The LMRP sits on top of the lower BOP and when latched is connected to it as follows. There is a hydraulically operated riser connector through which the well bore runs. The choke and kill lines connect via two mini collet connectors. On the underside of the connector on the LMRP there is a gasket held in place by four dogs screwed to the assembly, designed to achieve a tight seal. One of these gaskets fell out in the course of the events giving rise to the dispute. The PODs connect through two shallow cylindrical receptacles, one each for the Blue and Yellow POD, which sit on the top of the lower BOP plate. These receptacles have an internal diameter of 17″ and are connected to the lower BOP plate by four feet comprising welded mounts to each of which the receptacle is attached by an elastomer "spring" bolted to the receptacle. On the inner surface of the receptacle are holes of different sizes which connect to hoses attached to the outer side of the receptacle in order to carry the hydraulic fluid to the various valves required for the operation of the lower BOP. The PODs make a connection with these holes by a stinger which comes down from the lower side of the LMRP. Before latching, the stinger sits in a test receptacle, a shallow cylinder also of 17″ internal diameter, which is on the LMRP. The stinger comprises a cylindrical assembly with ports in its outer perimeter which are designed to line up with the holes in the lower BOP receptacle as the means by which the hydraulic fluid passes to operate the lower BOP. The stinger has four extendable segments which in its retracted mode sit flush with the four fixed sections on each of which is mounted a Teflon guide strip. The guide strip is designed to fit exactly into the internal 17″ diameter of the receptacle, whereas the stinger segments when first lowered are designed to sit slightly shy of the internal diameter of the receptacle. The stinger is then deployed by being "energised", that is to say the segments are moved outwards so that the ports, which have rubber seals round the holes, are pressed tight against the inner diameter of the lower BOP receptacle to form a sealed connection through which the hydraulic fluid can pass. This energising is achieved by pulling up an activator cone which is located within the centre of the stinger behind the segments. The activator operates by pressing against the segments internally pushing them outwards and holding them in place. When the LMRP is unlatched from the lower BOP, the stingers are "de-energised" by the lowering of the activator cone which should cause the segments to retract.
Lining up these connections in the latching process is achieved with four aids.
(1) On the top of the lower BOP stack are four posts which rise above the plate. These fit through gates on the LMRP (also referred to as funnels) which extend below the floor plate of the LMRP.
(2) The process of locating the gates over the posts is assisted by guidelines which run internally through the posts, and through the gates. The guidelines are connected to the wellhead at the bottom and to the Rig at the surface.
(3) On the underside of the LMRP there are four alignment pins which fit into recesses on the lower BOP. These extend downwards from the underside of the LMRP plate. Because they do so by considerably less than the height of the guide posts on the lower BOP, the alignment pins will only engage once the posts are part way through the gates on the LMRP.
(4) The fine alignment of the POD stingers in the POD receptacles is designed to be assisted by:
(a) the test receptacle cylinder on the underside of the LMRP sitting concentrically on the lower BOP receptacle to form a cylindrical whole with a common diameter of 17″; and
(b) 45 degree bevelling to the receptacle lip and stinger base; and
(c) the Teflon strips on the stinger assembly which are intended to slide against the inside of the LMRP receptacle.
Chronology of events
The Rig had been laid up in cold store in Sicily in 2009. It was recommissioned in the summer of 2010 to be let to ExxonMobil under a contract dated 2 August 2010 for work on a field in Scottish waters. For these purposes the BOP stack was sent for overhaul and repair to Yardbury Engineering and Oil Products Ltd ("Yardbury"), a mechanical and engineering contractor based in Aberdeen. The PODs themselves were not sent to Yardbury, but remained on the Rig in a shipyard in Rotterdam where they were the subject matter of repair and renewal by Transocean personnel under the supervision of a representative from West Engineering Services ("West"), which was appointed by ExxonMobil.
Providence is a small company and accordingly engaged the services of NRG Well Management Ltd and NRG Holdings Ltd (together "NRG") to assist in relation to the sourcing of a rig, negotiation of...
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