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Arbitration win for Kværner

Finn Harald Sandberg, Norsk Oljemuseum

A big battle was fought over the bill for fabricating the Draugen platform topsides at the Kværner Rosenberg yard in Stavanger. The dispute ultimately had to be settled by arbitration.

— Draugen topside at Rosenberg Verft in Stavanger. Photo: A/S Norske Shell/Norwegian Petroleum Museum

After four years of wrangling, the outcome was that A/S Norske Shell had to pay a total of NOK 311 million on behalf of the field’s licensees.[REMOVE]Fotnote: NTB, 12 January 1996, “Shell tapte voldgiftssak om Draugen-dekket”.

NOK 2.1 billion had already been paid following delivery of the structure from the Kværner yard in February 1993, but the two sides could not agree on the final amount.

They had continued to negotiate on a number of issues related to this settlement, and managed to resolve most of the matters in contention.

However, stalemate was reached in the autumn of 1994. Claims and counterclaims were presented, and one of the biggest arbitration hearings in Norwegian legal history began that August.

Kværner had originally claimed NOK 200 million in compensation for forcing the pace of fabrication work – a demand later reduced to NOK 165 million.

For its part, Shell maintained that the yard had breached the contract either deliberately or through gross negligence, and presented a compensation claim of NOK 1.47 billion.

"Shell lost to Kværner" from Dagens Næringsliv 13. January 1996

This was later restricted to NOK 576 million on condition that the Draugen licensees were allowed to retain a bank guarantee of NOK 198 million.[REMOVE]Fotnote: Dagens Næringsliv, 13 January 1996, “Shell tapte mot Kværner”.

The final adjudication rejected Shell’s claim, thereby handing Kværner a complete victory. Shell had to pay NOK 113 million for the bank guarantee and as a supplement for extra work. In addition came interest and legal fees.

According to communications vice president Atle Kigen at Kværner, this settlement was worth NOK 225 million to the group in 1995-96.[REMOVE]Fotnote: Aftenposten, 13 January 1996, “Draugenseier til Kværner”.