Rig Accident: ExxonMobil to Claim Damages against Contractor

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Mobil Producing Nigeria Unlimited, a subsidiary of the ExxonMobil Corporation is set to seek financial damages against a drilling contractor for Conoil Producing Limited, which allegedly damaged ExxonMobil’s pipeline, thus halting significant production of the company’s Qua Iboe grade of crude oil, THISDAY has learnt.

A drilling rig, which was contracted to drill for Conoil on the Anim Field, located in the Oil Prospecting Lease (OPL) 290, allegedly collapsed on an ExxonMobil pipeline, after developing mechanical faults, causing damage, which resulted in both oil spill and production curtailment.

THISDAY gathered that the jack up rig, christened ‘Monarch’, was operated by Nigerian service company, Depthwize, which was working for Conoil.

The rig damaged the pipeline, which pumps hydrocarbon fluids from Oso condensate and Usari oil fields to the ExxonMobil’s Qua Iboe Export Terminal.

Though ExxonMobil did not shutdown the export terminal, the damage impacted heavily on the pipeline to disrupt significant production of Qua Iboe grade.

A source at ExxonMobil, who craved anonymity, told THISDAY during the weekend that the company was set to seek huge financial claims against the drilling contractor for the company’s loss of production, as well as the oil spill caused by the accident.

“It was safety issue. The company failed to abide by best practices in the area of HSE (health, safety and environment) and that resulted to the avoidable accident. So, they will pay for the loss of production and will be responsible for the clean-up and remediation of the impacted sites. A joint investigation visit was scheduled over the weekend to access the extent of damage to the environment at the spill sites,” he explained.

Mobil Producing Nigeria (MPN) had earlier confirmed that “on Sunday, May 8, 2016, the Monarch drilling rig, owned by Depthwize Nigeria Limited and drilling on behalf of Conoil Producing Limited, damaged MPN pipelines when the rig intentionally grounded itself in the JV operating area after experiencing mechanical difficulties.”
The rig accident forced the company to declare a force majeure on exports of Qua Iboe, Nigeria’s largest export grade on May 13, 2016.

The company, however, said while plans for recovery were being finalised, it was working with its joint venture partner –NNPC, to manage potential supply impacts, and with Depthwize to remove the rig and in order to complete the damage assessment.

The company however, directed that “inquiries about the incident and clean-up plans should be directed to Depthwize and/or Conoil”.

Depthwize is a “world class drilling company, set up to provide leadership and excellence in the largely underdeveloped Nigerian inland and shallow water drilling market”.
Monarch is one of the three rigs in the fleet of the company, which owns and operates three rigs, two Swamp barges and one shallow off shore rig.

Monarch has been on the Anim field since Anim-1 was spud in June 2015.
Conoil had through its subsidiary, Continental Oil and Gas, at the 2007 oil license round, offered $105 million ( then around N13.4 billion) to emerge the highest bidder for OPL 290 on the continental shelf block while Dangote Oil and Gas bidded $21 million for the same oil block.