SEMBCORP Marine and Marco Polo Marine are going ahead with arbitration proceedings in the High Court of Singapore, having both failed to come to an agreement regarding a dispute on the termination of a rig contract.

In April the companies announced they had failed to reach a settlement pursuant to a mediation process involving senior management of Marco Polo subsidiary Marco Polo Drilling and Sembcorp subsidiary PPL Shipyard.

Arbitration proceedings were started by the  parties as a result, with the companies committing to make further announcements when appropriate.

Earlier this year, Oil & Gas Australia reported that Marco Polo Drilling had terminated a US$214.3 million rig construction contract with PPL, claiming PPL had failed to comply with material contractual obligations.

Marco Polo cited cracks found on all three legs of the rig during two rounds of tests as the primary reason for terminating the contract with PPL.

However, Sembcorp Marine responded advising Marco Polo had breached the contract and as a result Sembcorp terminated the contract with Marco Polo.

PPL was contracted by Marco Polo for the construction of a high-specification jack-up rig based on PPL’s proprietary Pacific Class 400 design.

PPL disagreed with the Marco Polo’s allegations and said it regarded the announcement as a repudiatory breach of the contract.

Sembcorp said PPL then terminated the contract and planned to claim amounts due under the contract against Marco Polo Drilling and its guarantor Marco Polo Marine.

Marco Polo said in early December it had received written demand for payment from PPL and PPL’s legal counsel had also written to Marco Polo’s legal counsel to state PPL had commenced legal action against the company.

In response, Marco Polo reiterated its position that the company is not under any obligation to make the payments claimed by PPL and that PPL has no basis to commence legal action against the company.