Baker & O'Brien, Inc.

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FPSO Hull Conversion: Longer Schedule and Bigger Budget

International Arbitration, South & Central America

May 1, 2019

Floating Production Storage and Offloading (FPSO) vessels are often used to produce oil in remote offshore locations that lack offtake infrastructure.  An FPSO can be built either on a new ship hull designed for the purpose or on a used hull that is converted for use as an FPSO.  Hull conversion projects have higher schedule and cost risks over new hulls, primarily due to significant uncertainty regarding the vessel condition and the required scope of repairs.  In addition, an FPSO conversion often uses different shipyards and contractors for each phase of construction, which introduces additional degrees of complexity into the EPC process.

An Owner engaged several contractors located around the world to participate in an FPSO conversion project, including:  (1) an engineering company to provide all engineering and design services; (2) a conversion yard to perform hull repairs and modifications; and (3) a module fabrication and integration contractor to      procure equipment and to fabricate, install, and integrate the modules on the converted hull. 

The project was delivered late and encountered large cost overruns, resulting in claims and counterclaims between the Owner and one of the contractors.  The Owner alleged that the contractor’s work was not fit for purpose and delayed delivery of the FPSO.  The contractor alleged that incomplete hull conversion works, incomplete engineering, Owner-instructed changes, and out-of-scope carryover work from other contractors contributed to the large cost overruns and delays.   

Baker & O’Brien was retained to investigate: (1) the quality and completeness of “Approved for Construction” engineering and design deliverables; (2) whether design changes were implemented late in the process; (3) the extent to which the FPSO modules were delivered late or incomplete; and (4) whether any of these issues could have had a material effect on the delivery of the FPSO.  Our investigation involved the review of the computerized 3-D model prepared for the hull conversion and modules, review of changes to equipment specifications and size during procurement, and an evaluation of pipe fabrication activities from design through final inspection and shipping.  Our findings were presented in an expert report, reviewed by other experts, and defended in expert testimony.