Bumi Armada Declares 'Force Majeure' on ONGC FPSO Deal as Virus Hits Construction Schedule

Malaysia FPSO contractor Bumi Armada has declared a 'force majeure' event related to the FPSO contract it has with India's ONGC, citing the effects of the coronavirus pandemic on the FPSO construction schedule.

ONGC, in a joint venture with Shapoorji Pallonji, last year secured a 9-year, $2.1 billion, FPSO charter and operations contract with ONGC, on the Indian oil company's NELP Block DWN 98/2 Development Cluster-II field, located off the west coast of Kakinada, India.

The 30/70 Bumi-Shapoorji joint venture - then awarded a contract to convert the VLCC Ariake into FPSO to Singapore's Sembcorp. The vessel is designed to produce up to 90,000 barrels of oil per day (BOPD) and have a 1.3-million-barrel storage facility, and was scheduled for delivery in the second half of 2021. 

However, in its quarterly report on Thursday, Bumi Armada said that the FPSO construction works have been delayed by the pandemic.

"The construction of the FPSO has commenced but is delayed due to regulatory constraints imposed by the government of various countries following the COVID-19 pandemic," the company said, without providing the expected delivery date.

"This has affected the work schedule of various sub-contractors operating in countries that manufacture major components for the FPSO.  In addition, this has indirectly affected the timing to secure additional funding for the 98/2 Project," Bumi Armada said.

As a result of these delays, Bumi Armada said Thursday that a notice had been issued to ONGC advising of a “Force Majeure Event” "due to circumstances beyond the control of the associates and subcontractors of the 98/2 Project." 

"The associates remain committed to fulfilling their obligations under the charter contract and are currently in discussion with the charterer regarding the construction timeline, as well as finalizing various components of the funding structure," Bumi Armada said.

According to the World Energy Reports FPSO report released last month, ONGC said in July 2020 that "development of the Cluster-2 region was facing “force majeure challenges” from several vendors due to the Covid-19 outbreak.

Sembcorp Marine said last week that following the relaxation of COVID-19 measures in Singapore since June 2020, the company's Singapore yards began to resume production activities in early July 2020.

"Our operating yard workforce (including sub-contractors) have now increased to almost full workforce levels," the Singaporean shipbuilder said.