BP and Kosmos Energy are pursuing claims for approximately $535 million in binding arbitration against McDermott International, alleging that the contractor failed to fulfill its contractual obligations regarding subsea pipeline installation for a liquefied natural gas (LNG) project off the coast of Africa, estimated at $4.8 billion. Kosmos Energy disclosed this dispute during its fourth-quarter results call, indicating that it anticipates recoverable damages of around $160 million related to the Greater Tortue Ahmeyim natural gas project situated offshore Mauritania and Senegal. BP initiated the arbitration process by serving McDermott with a claim notice, aiming to recoup the incurred losses, as stated by Kosmos Energy.

The subsea construction project was initially awarded to McDermott and Baker Hughes in 2019, with an estimated value ranging between $500 million and $750 million. The scope of work included the installation of subsea pipelines, risers, flowlines, and subsea production system equipment. However, McDermott halted work last year amidst a protracted contract dispute over non-payment. In October, BP replaced McDermott's team with Dutch contractor Allseas Energy and Italy-based contractor Saipem SpA to carry out the subsea project. This included the installation of approximately 75 km of two 16-inch export pipelines in water depths ranging from 1,500 m to 2,800 m, as well as four 10-inch corrosion-resistant alloy infield lines at depths of 2,800 m. Construction commenced in December, utilizing the construction vessel Pioneering Spirit, claimed by Allseas to be the world's largest.

Arbitration proceedings are anticipated to occur during the second quarter, with a decision expected by mid-year. BP and Kosmos have expressed confidence that the dispute will not impede project progress significantly. Substantial advancements have already been made in the installation of infield flowlines and subsea structures. Work resumed in the fourth quarter of last year and is slated for completion by the end of the second quarter of 2024.

Both parties acknowledge that contract disputes are not uncommon, and they are committed to engaging in discussions to reach a resolution. It has been public knowledge for several months that BP and McDermott terminated the Tortue contract, with each party holding differing perspectives on performance and contractual breaches. Additionally, BP and Kosmos are engaged in arbitration regarding unspecified offtake agreements.

The Tortue project, situated between Mauritania and Senegal, boasts a 30-year production potential and holds an estimated 15 trillion cubic feet of potentially recoverable gas resources. The project's development has reverberated throughout the oil and gas industry, with delays and disputes potentially carrying significant ramifications.