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2001wL 1476198 Offrcial TranscriptOffioial Transcript(Cite as: 2001WL 1476198)

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Amoco (UK) Exptoration Co v British American Offshore Ltd HighCourtofJusticeQueensBenchDivisionCommercialCourt Mr Justice Langley FridaY l6th November, 2001 (instructedby MessrsHerbert Smith ) forthe Mr M. BarneseC , Mr D. Unwin eC , Miss F. Parkin and Mr J. Howells Claimants. Toledano(instnrctedby MessrsFreshfields Lord Goldsmith QC , Mr R. Siberry QC , Mr A. Grifflths , Mr C. Graham and Mr D. BruckhausDeringer ) for the Defendants. JUDGMENTMT JusticeLangley :Introduction agreed withthe claimant ("Amoco") to By a contract dated September26, 1997 the Defendant (*BAO") as "contractor" and/or coriila v ("RGV') to "drill, test (as required),completesuspend, provide a Jack-up Drilling Unit known as the Rowan rate was the North Sea.The contract was to continue for at least one year. The operatinghire abandon,,one or more *"11, in that the RGV would The contract contemplated $175,000 per day. At the time the RGV was under constructionin America. in Rotterdamon December15, 1998' BAo arrive in RotterdambetweenAugust I and october l5 1998. In the event it arrived Amoco saysit never came on hire and the claims that the RGV came on hire under the contract from 18.30 on December25. that Amoco was entitled to terminatethe contract.Amoco did purport to condition ofthe RGV togetherwith the delay was such terminatethe contracton January 19, 1999. the contract either under its express The central question in these proceedingsis whether Amoco was entitled to terminate for claims a Declarationthat its termination was valid. If it was, Amoco claims damages provisions or at common law. Amoco claim for damagesfor no wasted costs (the quantification of that claim being excluded from the presenttrial)' Amoco makes for Declarations that breach of contract on any basis other than entiilement to terminate the contract. BAo counterclaims any December 25' 1998to October22, 1999(the datewhen the termination was invalid and for a daily rate underthe contract from at the same rate thereafter until 25 BAO acceptedwhat it says was Amoco's repudiation of the contract) and for damages uS I yearterm. That claim is for a principal sum of app_roximately $65m. In addition BAo December,1999"or the expiry of the reimfee payable under the confiact for mobiliiation of the RGV from America to Rotterdam and claims the balance of a location which in the event was to be bursementof costsincurred in mobilisation from Rotterdamto the first intendeddrilling cost some $225m to design the Arbroath field. The Arbroath platform is situatedsome 130 miles eastof Aberdeen.The RGV and build.The Partiesand PlaYers In August 1998 a At the date of the contract Amoco was a subsidiary of the American oil company, Amoco Corporation. and BP plc. The merger was subject to regulatory approval but was merger was announcedbetween Amoco Corporation group was known as on December31, l99g shortly before Amoco terminated the contract. Thereafterthe merged "o*-pl"t"d BP Amoco. in the Arbroath field Amoco had various interestsin the North Sea.It was the "operator" ofthe Arbroath field. Its co-venturers (41.03o/o), Amoco had were Enterprise oil pl; and Amerada Hess Limited. "Entirprise" had the largest share in the field of the individuals mainly involved Hess,,zg.2yo.AttachedasAppendix C is a list (in alphabeticalorder) 30.77%oand..Amerada gave evidencewere in the eventswith an indication to show those who gave evidence.The principal players for Amoco who

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2001wL 1476198 (Cite as: 2001WL 147619E) Official Transcript Official Transcript

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projec! Morty Mark Gillis, the Central North Sea Drilling Team Leader, who was responsiblethroughout for the Arbroath the merger, and John Mogford, then technology vice- Presidentof BP Denholm, the Arbroath delivery manageriollowing is maAmoco, who was responsiblefor safetymatters and at least in part for the decision to terminate the contract. Where it so, those who were originaily employed by Amoco or BP are referredto as "Amoco heritage" or "BP heritage"as terial to do the casemay be. Mr Gillis was Amoco heritage.Mr Denholm and Mr Mogford were BP heritage. The Arbroath field had beenproducing for someyearsfrom the existing platform. The platform had no drilling facilities. From about 1996 considerationwas given to an "infill development" ofthe field designedto exploit the reservesbetter by drilling further wells from the existing platform by the use of a drilling rig. In September l9g7 the RGV was under constructionby a company called LeToumeau Inc which was building it for Rowan Comianies Inc. (..Rowan").Rowan is andwas a well-known drilling companyandthe parent companyof both LeTourneauand BAO. The RGV was to be owned by Rowan and operatedby BAO. It was largely built at LeToumeau'syard in Vicksburg, Mississippi. LeToumeau'sHead Offrce is in Longview, Texas.LeTourneauhas designedand built some 160jack-up rigs about 40% of the jack-up rigs in operationworld-wide. Daniel McNeaseis and was executivevice-presidentof Rowan and presidentof its drilling subsidiaries.Robert Rimlinger was Rowan's project managerfor the constructionof "super Gorilla" classrigs such as the RGV (which was the first of its class). Michael Mui"o- is and was the managingdirector of BAO. Mr (Bryan) Quinn is and was the RGV Rig Manager. to Much ofthe equipmenton the rig to which it will be necessary refer was suppliedby other companies: i)Cameron (an operating division of Cooper Cameron Corporation) provided most of the well control or blowout prevention (BOP) equipmentand related systems; ii)Varco IndustriesInc provided the Pipe Racking System( PRS ); iii) Pacific Steel Casting Company ( PSC ) manufacturedand supplied the pinions for the jacking system., iv)National Oilwell supplied the power swivel for which the controls were provided by Louisiana Electric Rig Service ( LERS);Ross Hill (the project engineeringdivision of National Oilwell) provided power and control systems;fugserv provided the driller's chair. The significance of the equipmentsupplied by these companieshowever was removed as a result of concessionsmade by Amoco on Day 34 of the trial. The certifing authoritiesfor the rig were the American Bureau of Shipping ( ABS ) and Det Norske Veritas ( DNV )' Amoco engagedindependentspecialistsin connectionwith the certification and testing of the rig called AberdeenDrilling Consultants ( ADC ).The RGV 'at to It is not necessary give more than a brief description this stageof the RGV and those parts of it which arethe subjectof to of particular dispute.No lessthan 17 expert witnesseshave given evidenceon various aspects the RGV and the issues which to to the extent I considerit necessary do so. Attachedto thisjudgment as Appendix D is later that gives rise will be addressed a list ofthe expertswho gave evidenceand the areasofexpertise which they addressed. the The complaints Amoco pursueabout the stateof the RGV fall into three broad categories: jacking system;the well control (or BOP) system;and the drill floor equipmentnow limited to the Pipe Racking System(PRS).A fourth complaintthat the crew was not fully trained is also now limited to the PRS and can be consideredin that context. Somecomplaintsare saidto havehad serious safety implications, others to have affected effrciency; some to have been readily remediable, others not. To guote Amoco's opening submissions"in addition, BAO's persistentrefusal to recognisethat anything was wrong is of importanceto the repudiatory nature ofthe breaches". The scale of the RGV and the proposeddrilling programmein the Arbroath field is impressive.The wells were to be drilled to a length (they were to be substantiallyhorizontal) of 10,000to 20,000 fr..(2to 4 miles); the drill string was to be madeup of 30 ft. sectionsof pipe so requiring up to 600 lengthsof pipe to be screwedtogeiher. Drilling requiresmachinerl'to rotatethe drill,

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the *mud,, to be continuously passed down the drill string and out of the drill bit to retum via the annulus (the spacebetween drill string has to be to be cleaned in the shakers and re-cycled' The drill pipe and the *ett uori or casing) with the ;*G for securepassage reto renew the aiin Uit and casethe hole' The casing provides a withdrawn (.lripped") every few days in place.Each section of casing, asthe well which are cemented covered formation fluids. It consistsof sectionsoisteel pipe ultimate effect is similar to a telescope' is of smaller diameterthanthe one preceding it, so that the gets deeperor longer, drilling equipment on it could be cantilevered out over the The RGV itself dwarfed the Arbroath platform and hence the jacking u" jacked down to the seabedand then as platform. The RGV was supported on three t iarrgutarlegslrhich "outa to th" t"u. The RGV's elevatedweight was designed continuedthe hull could be lifted up out of and to tie ct osJnheight above System a water depth of 408 feet'The Jacking lbs be approximat ely 42,72.5,000 and it was designedto operateln arejacked up.and.down using a rack and pinion The technology is relatively simple. The scale is huge. The 3Jria-ngular.legs 3 legi and corresponding% pirehpinions rotatewithin 9 mechanism.The racks are fixed to eachofthe 3 cornlrs of eachof the motors are 3^legi' Individual pinions and their associated elevating units fixed to the deck, one at eachorttre teg chords on the ananggdin 4 opposingpairs' During normal 8 giar units identified by letter (for the rack) and number. Each elJvating unit has rate of I -5 feet per minute' The designratingsare the jacking systemwas capableof ,uising or lowJring th: h"ll u, a operations (Appendix A, at page 36)'Well control equipment statedin Appendix t toihe Contract,paragraph1.4.11'10. that build up in the wells' In control the pressures The purpose of the well control equipment is to prevent blow-outs and to of pressure the ot is proviied by the mud itself: so long as its pressureis greaterthan the simplistic terms the first and main pressureanticipated' "ont weighted accordingto the formation fluids the fluids cannot enter the wellbore. n.itti"g mud can be that the formation will be such that pockets of There is a particular risk when drilling the early stagesinlo the-.seabed the ^drill rig floor, is used for well control at low-pressure gas may be penetrated.The diverter, instittea immediately under feet). The diverter is designedto divertthe those stages(in the North sea commonly untit oriiting reachesa depth of is0o-1800 ..kicK,) through an overboardtinJand away from the rig' The reasonis that closure of the well by use of a resultant flow (or in shallow wells and risk the stability of the legs Bop could result in p."rr,..", w-hichwould fracturethe weakiock formations with a path for the drilling mud to travel via the flowline to the of the rig on the seabed.The diverter is installed in a housing overboard'The diverter systemis an assembly shakersas it returnsto the surface.This path canbe closeduna tn" flow diverted The valves are openedand closed hydraulically of valves and locks which can be moved out of the way when it is not needed. pressureof 750 psi with a maximum of by the Bop control system. The RGV diverter was designedfor a normal operating ,ro leakageon to the rig and diversionto safety a 2200 psi. That is the pressureat which the systemcould m-aintain sealto "rrru." overboard. drilling stageshave been completed' It is the The Blowout preventer (BOp) Stack is installed under the diverter once the early pressurethat the diverter is rated to withstand' The Stack includes means of well control in t igt, presrure sectionsabove the and fluid should formation fluids enterthe wellbore' The valve large valves which may be closed to contain *"llbor" pressure well under plannedand controlled condi(or valves) are closed,ihe well shut in, and the fluids can then be pumped out ofthe Unit) is operatedby hydraulic pressure' tions. The Bop controi system (sometimesreferredto as the Accumulator or Koomey in which hydraulic fluid is held under pressure The major item of the rryarautic control equipment is the Accumulator Unit BoP placedunder the diverter and four Ram ready for activation. me nCv had two types of blow out preventer.An Annular up the "BOP Stack". The BoPs sealthe annulusor the entire wellbore if Bops placed underthe Annular Bop, together making to is ratedto.control pressures 10,000psi' It there is no pipe in the well. The Annular-Bop (sometiires referredto asthe Hydril) the centreof the wellbore and will has a large doughnut shapedrubber packing elementwhich is hydraulically pushedtowards to pressures 15'000 psi. Each has two close and seal on whatever size of pipe is in use.The Ram BoPs were rated to control are pushedinto the wellbore by opposing hydraulic cylinders steel blocks (rams) which include large rubber seals.The blocks preparedwith blocks to seal round the size until they contact each other and form a seal.The four Ram BOPs consistedoftwo (the blind shearram preventer)which.can cut of drill pipe in use; one which could seal round a range ofpipe sizes, and one are fitted to ports on the side of the Ram through any pipe in use and form a seal or seal an opJn frot".-cttokg -1ndKill valves when a BoP is closed' The drill floor BOps. They are opened to circulate mud out of lcnote; or into (kill) the wellbore equipment

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out over a platform and consistsof a The drill floor equipment is situated on that part of the RGV which can be cantilevered a Mud Circulating System' There is a derrick 170 ft high, a Rotating System,a lipi HanAtingSystem,a Hoisting Systemand driller's chairs' assistant driller,s cabin from which the vaiious frnctions can beiontrolled from the driller's and and the Rotary Table' The The Rotating Systemrotatesthe drill string and bit. It consistsof a Power Swivel (or Top Drive) is a link in the mud system as it power Swivel also supports the weight of the drill string for all normal hoisting operations and to the drill string which can delivers mud into the drill string viaihe wash-pip" u.r"*bly. It is essentiallya large motor attached powered by two large DC electric motors. The Power Swivel can be raised or lowered in the derick by the drawworks. It was also be usedto make or break pipe connections. in standsof is The pipe Handling Systemconsistsof an kon Roughneckand aPipeRacking System. Drill-p_ipe storedvertically ofpipe h-ld in "fingerboards" setback from the drilling area.The pipe racking system 90 ft. lengthsformedof 3 x 30ft. sections drill (pRS) is usedto carry pipe to or from the standsfrom or to the well centrelineto add or removestandsof drill pipe from the the pipejoints using tongs.The itring. The iron roughneckis a mechanicalsubstitutefor the human "roughnecks" who torqued the box end by iron ioughneck gdpi the drill string and a standofpipe presented the PRS and spinsthe pin end ofthe standinto conPRS on the RGV was semi-automaticand computer assisted at the to! of thtdrill string torquing the two togethir. The the drillels cabin. It consistedof a vertical column traversing the rig floor from the trolled from the assistantdriller's chair in a hydraulic setbackstandsto the well centredriven by upper and lower drivers. It had upper and lower arms,the upper ann had which provided only grip assemblyto clamp, hoist and guide iheltand of pipe, the lower arm had a pneumaticclaw assembly stability and guidanceat the lower end of the standof pipe' fixed The Hoisting Systemconsistsofthe drawworks, blocks and drilling line. The drawworks is essentiallya very big winch or as possible.It consistsprincipally of vertical craneusedmainly to get drill pipe in and out of the well hole as rapidly and safely or off a hoisting drum, brakesund .lutrh*r. Fower is transmittedthrough the drum to removethe drill string which is spooledon pulled out of or lowered into the well hole the weight of the drill string is held in the drum-as required. When pipe is being ..elevators"a hinged collar wtriitr closesaround the pipe and suspends doesnot gnp it at the pipe joints. but The Mud Circulatory System . Drilling muds are water or oil basedslurries with controlled physical and chemical properties. The mud servesto balancethe pressureof formation fluids, removes drilled cuttings from the well, cools the drill bit and luthe bricatesthe drillstring. For well tontrol purposes, mud systemis also connectedto the chokemanifold and the BOP stackby the choke/kill lines. Power and control power on the RGV was supplied by 5 generatorsplus an emergencygenerator.Theseprovided 3-phaseAC power distributed through a main switchboardand an emergencyswitchboard.Most of the equipmentwas poweredby DC motors- The power to these was controlled by Silicon Controlled Rectifiers in tum controlled by a number of computerisedcontrollers provided by Ross Hill. The relevant instructions came from the chairs and consolesin the driller's cabin.TheContract and its Construction of and appendices the contractbut To facilitate the readingofthis judgment I have attachedas Appendix A the material clauses on thosewhich are material to the dispute. to it is necessary set out here and comment The recitals and Clause I establishthree mattersof some significance.First, the contractwas for the drilling of wells by BAO using the RGV, not for example for the use by Amoco of the RGV. BAO was to supply and pay the crew and do the drilling. SecJnd,although it was known by both parties at the time that Amoco intendedto usethe RGV for the Arbroath lnfill Project, the contract made no referenceto Arbroath but only to "locations in waters of the United Kingdom Continental Shelf' which Third, Clause I definesthe drilling of wells as "Well Operations". Amoco might designate. Clause 2 is important. Clauses 2-1 and2.2 provided for the commencementdate and duration of the contract and the same corrunencement date for chareesfor the hire of the RGV.

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Clause 2.1 provided: ..Contractor shall mobilize the Drilling Unit from the United StatesGulf of Mexico to Rotterdam,Netherlandswith arrival in Contract shall commence Rotterdam anticipated to occur sometime between August 1, 1998 and October 15, 1998. The -hours tow to Amoco's after delivery of the Drilling Uniiat Rotterdam or when the Drilling Unit commences (24) twenty-four of one ( I ) year or until completion first drilling location, whichever occurs first. This Contractshall continue in effect for a term the option to extend of well operationson any well in progresssubject alwaysto the provisions of Clause28. Amoco shall have year . . . ." the term of this Contract for a further period of one Thus: was no "drop i) The clauseprovides only for an "anticipated" window for "arrival" of the RGV in Rotterdam.There the rig from America or completionofthe rig or delay in delivery dead" dateand no expressprovision for either mobilisation of ;anticipated" is I think inconsistentwith a time commitment. It is not suggested that at the time ofthe at all. The use ofthe word the time window statedwas not honestly and reasonably"anticipated" by BAo. If Amoco wanted and BAo contract arrival in (or at least should)have had been preparedto accepta time commitment it would and should have been spelt out. Amoco must be for its account.But it is no surprisethat with known that.waiting on wlather time" following delivery at Rotterdamwould no time coma new build rig unde. construction (by LeTourneau not BAO) and the need to transport it acrossthe Atlantic iay that time for mobilisation or delivery of the RGV might not have been made of the mitment *as igeed. That is not to nor that delay or fu*her delay might not be material to other breachesof contract if such ocessencein given circumstances ever curred. In the event, Amoco does not contend that either the time of delivery or the time of mobilisation from America the on year was dependent further agreement, ofthe Contract. Although the option to extendfor a further becameof the essence until completion of well operationson any well in one year term itself began on "delivery" and was automatically extended progress on its expiry,iubject alwaysio the provisions of clause28" which is the "Termination" provision. The extensionis alsJconsistent wiih the indefinite nature of the time provisions in the contract and reflects the commercial realities of drilling year operations.Amoco had the protection that wheneverdelivery in fact occurred it could completework in progresswhen a was in my judgment the bargain, expired. Neither start nor finish of the term ofthe contractwas fixed. The rate was fixed. That albeit one which Amoco and the co-venturerscameto regret. judgment. 53 ii) Mobilisation ,to Rotterdam" was expressedin obligatory terms ("shall"). Seealso paragraphs to 58 of this was to be the earlierof 24 hours after "delivery" of the RGV "at Rotterdam" or uponthe ofthe contract iii) The commencement commencementof tow to Amoco's first drilling location. There is a dispute as to whether "delivery at Rotterdam" is to be ..arrival at or in Rotterdam" ( Amoco's primary caseand occurring on l5 December1998)or to mean when construedto mean BAO made the rig availableto Amoco at Rotterdamfor the purpose of performing the contractualservices(BAO's primary case and which BAO contendsoccurred on 24 December 1998) or when the rig was fully in accordancewith the contract( Amoco's secondarycaseand which it contendsnever occurred) or in any event when the RGV commencedtow to Arbroath, which it did at 23.00 on January9, lggg (BAO's secondarycase).Amoco also submits that even if BAO's primary caseon construction be right the rig was in fact made availableto Amoco on 15 Decemberin any event. iv) The clause uses both the expressions"arrival in" and "delivery at" Rotterdam which at least suggeststhey are used as different concepts.If the contract was intendedto commence24 hours after "arrival" of the RGV in Rotterdamit could readily have said so. The word "delivery" can and, I think, more usually would, involve a tender or handing over of the object to be delivered. of v) The rationale for commencement the contract to follow only 24 hours after "delivery" ratherthan at onceupon delivery is not obvious. The suggestionof counsel was that it was to allow a short period after "arrival" or "delivery" to elapse for the benefit of Amoco to gear up its operationsand before the contractperiod and so liability for charges(seeclause2.2) began.lf that were so (despiteAmoco's submissions)it would make equal sensewhichever constructionwas preferred. In contrastno elapseof 24 houri appliesto commencementof tow. The suggestiondoesnot to my mind greatly assistthe constructionissues: both ..arrival" and ..delivery" would be expectedto be well flagged in advancewhateverthe right construction.But I do think it unlikely that the parties would have agreed either that chargesor that the term of the contract were to commence simply on on arrival as disrinct fiom delivcry ofthe RGV in the sense rvhich BAO relies (with or withoulthe 24 hours) at leastwithout any clearly expressed(and I seeno basis to imply) contractualcommitment that the RGV should be ready for operationson "arrival".

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be of some significance' The contract very arvi) The altemative time of commencement(commencementof tow) is said to go to Rotterdam from America and leave from Rotterdam on guably requires and certainly contemplates that the RGV would alternative cornmencementtime can be read as tow for its first drilling assignment.The only doubt arises from the fact that the Rotterdam. If, however' the RGV went to Rotcontemplating that tow to tlhe first drilling iocation could precedede]ivery at tow to the first drilling location could ..delivery,,was co-terminuswith "arrival af' an alternatir" oi"o--"ttcing terdam and if to give no meaningto the whole clausesave be never in practicearisesavein the 24 hour window following arrival. That would in Rotterdamunlessit begantow to the first that the contract should commence24 hours after arrival or-"delivery" of the RGV that is a possible meaning of the words and one for which Amoco drilling location before the elapseof that 24 hours. Whilst on the other hand it is also diffrcult to conceive contends,if it had beenthe intention it could have beenmore simply expressed. "delivery" or could have that commencementof tow frsm Rotterdam to the first drillingiite could practically occur,without had not alreadyoccurred.Neither approach time even if a tender of "delivery" plus 24 hours been intended as a commencement is to my mind wholly satisrying. arrival of ofthe choice of language,Amoco's primary casethat "delivery" occurredsimply on In my judgment, really because with the occurs only when the RGV is fully in accordance iirat delivery the RGV in Rotterdamfails. Amoco's secondaryca-se ofuncertainty and the likely existence an improbablecriterion because contract also fails. It is not what the clause,uyr. it is also of some defects(latent, seriousor otherwise) or at least disputesabout them. generallyand in the contextof I think BAo,s primary caseon the construction is correct."Delivery" is a recognisableconcept 2 Llovds Rep 224 at238. What is or may be defectivemay yet be and often is shipping in particular: seeThe Madeleine [1967] or rejectthe delivered.TheEfects may or may not of Jo*r" give rise to a right in the other party to claim damages nonetheless payment of the secondhalf of the mobilisation goods. Nor do I think the wording (paragraphs57 and 58) or the facts relating to may have been iee (paragraph 146) affect this conctusion. Other considerationsmay apply to such a paJment or the invoice it would be agreedthat delivery would be a matter for BAo. It was plainly in prematuri. Nor is it improbable,to my mind, that bAO', commercial intereststo deliver the rig as soon as possible so that the meter for chargesstartedto run. remain of importance(in particularto the operationof clause 28) in Although the issuesaddressed the previous sub-paragraphs is not (or at least no longer) in issue.Amoco relies on delay in getting the RGV to Rotterdam it is also important to note what and poor state not as a basis for termination of the contract but as a factor which made what it allegeswas the lack of readiness Amoco doesnot submit that it of the RGV thereafterthe more serious becauseit meant further prolonged or indefinite delays. 19, 1999would have been entitled to terminate the contract if the RGV was fit and ready for drilling operationson January as regardsmobilisation of the RGV from America to Rotterdam Indeed it is acceptedby Amoco that it afErmed the contract dewhich in fact took place only in November 1998.Nor do these issuesaffect the amount of BAO's counterclaim.Whether or 24 December or 9 January,the RGV remained without work for at least one year aftet each date. livery occurred on 15 the Moreover whilst Amoco doesnot even acceptthat the contract commencedunder Clause2.1 on 9 Januaryit doesdescribe ..a red herring" in its reply submissionsbecause"the effective choice is betweendelivery on l5 or 24 December question as occirring 24 hours thereafter". In my judgment whateverthe constructionofthe clauseand whetheror not with commencement of delivery had occurred prior tothe conunencementof tow on 9 Januaryin the circumstances this casethe tow also involved "delivery" in any acceptablesenseof the word. ofihe contract as it must have encompassed the commencement Clause 2.2 provided for the commencementand termination datesfor charges.The former reads: ..The commencementdatesfor chargesshall be the point in time following the expiration of twenty-four (24) hours after the delivery of the thilling Unit at Rotterdam or when the Drilling unit commencestow to Amoco's first drilling location, whichever occurs first." Thus chargesconunenceat the same time as the contract commencesunder Clause2.1. It follows, in my judgment, that they commenced24 hours after BAO made the rig available to Amoco at Rotterdamfor the purposeof performing the contractual servicesor at the lateston 9 January.

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the expressobligations conceming the fitness clause 3.1 is entitled,.The Drilling unit,,. It contains RGV. Clause 3.1 relatesto "Equipment" :

and performanceof the

operations at the to ,.The Drilling unit shall be fully equippedas set out in Appendix I and shall be adequate conductthe well specifiedas being The Dritting unit and all oit e, eqrripment,materials and zuppliel.hereinafter locations specifiedby .q,moco. in firsiclass working condition, shall be suitablefor their intended supplied by the contracior shall be certified and maintained together wiitr ttte personnel' shall be furnished and mainpurpose,shall conform to all relevant laws and sfecifications and, tained by Contractor at its sole cost ' ' "" the desigrr criteria (see clause 3.2) afd short particulars of -trrls Appendix I contained a description of the RGV, its ratings, judgment. It is not allegedby Amoco that any ofthe specified et from ttre extract in efp*Ji* equipmenton it as appears It is allegedthat someof it, in particularthe was not suppliednor is any complaininow made about its certification. equipment or suitablefor its intendedpurpose' jacking systemand well control system, was not maintainedin first classcondition Clause 3.2 relatesto "Performance": ..contractor represeftsthat the Drilling unit shall be capableof-moving from location to location, and that subjectto seabed in united-Kingdom continental Shelf waters ' ' ' ' The conditions,the Drilling unit shall be capableor f error*ing satisfactorily by ratings for locations shall be established contractor upon design criteria for ttre oriiling Unit are iefined in eppendii 1. The of Amoco's selection location. . .." and the obligations in clause 3.1 were requiredto be fulThere is an issue on the pleadings as to when theserepresentations or on commett"".n"nt ( Amoco) or when the relevant filled. The competitorsur", or niobilisation from America, on "delivery" (BAo). The resolution of this issueis not piece of equipmentwas required for well operationsaltematively on commencement for breach of either obligation even if it was to my mind as important as it might seem.Amoco makes no claim for damages not whether there was a breachor breachesbut if there was broken at the earliestof the alternative dates.The crucial issue is mattersof whilst that issueno doubt encompasses the agreement. whether it or they were such as to entitle Amoco to terminate 3'1 is on the "adeThat said, the emphasisin Clause time, such as likely delays in rectification, it provides a different focus. ..to conduct Well Operationsat the locationsspecifiedby Amoco" (in the eventArbroath) and in Clause3'2 quacy" of the RGv referenceto the chosenlocation' That' in my on ..performing satisfactorily'' in the North Sea but again with iome specific of is to be judged, but they are effective from commencement judgment, fixes the criterion by which fulfilment of thJ clauses to Amoco was entitled at commencement a objective of the agreementthe contract. I think this reflects the basic commercial upon to do so and which was equippedas rig which would be suitable for moving to and drilling at Arbroath when called judgment, could either obligation be broken before the contract agreed.That is what it agreedto pay for. on no basis,in my comply with the provisions at the time of mobilicommencedunder clause 2.1. If it had been intended that th; RGV should it is. Nor is there any reasonwhy Amoco should have sation from the united Statesclause 2.1 would not havebeen in the form which was itself uncertain' been concernedwhetherthe rig was completed during the tow the duration of Clause3.3 providedfor "Certification": .,contractor warrantsthat, prior to commencementof operationsunder this contract the Drilling unit, having been examined machinery,equipment accommodation, by inspectorsof the relevant certifying Authority, confo.ms in all details of structure, instrumentssetting out regulationsto be observedin the conductof laws or-statutory and in every other mannerwith all ",r*"rt ...." offshoreoperations BAo hasrelied on the certificates At various stagesin the proceedingsboth parties have raisedissuesin respectofcertification. suggestthat the RGV was fit for purpose.Whilst Am91o no longer relies on the alleged which were issuedby ABS and DNV to .*,ereunreliable because they were issuedwithout knowledge of the full facts invalitlity of the certificatesit submits that they

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of and that in any event as expressions opinion of their authorsthey are immaterial and inadmissible' of "prior to,commencement operations" clause 3.3 itself is notablein providing for fulfilment of the certification requirements ..offshore operutioni" and not "arrival" or "delivery" or commencement of the contract. I think, despite not and in referring to .bell operations", the words areto be construedto mean, in effect, drilling or at leastpreparation using the defined expression if certification for drilling at the chosenlocation. That accordswith the constructionI prefer of Clauses3.1 and 3.2. Moreover of operations" it would be expectedthat the samecriand regulatory conformanceis required only "prior to commencement terion would apply to the obligations under Clauses3-l and3'2' ..compensation"to be paid to Rowan. The provisions are important not only becauseof the counClause 5 provided for the terclaim and becauseAmoco contendsthat even if its termination be held to have been repudiatoryonly "the breakdownrate" the would have been recoverable,but also becausethey provide pointers to the basic commercial obligationsundertakenand degreeof importancethe parties attachedto them. "5.1 Amoco shall pay Contractorfor work performed, servicesrenderedand material, equipment,suppliesand personnelfumished by Contractor, a sum computedat the iates specified in this Clause.The period of time for which eachrate shall be applicable shall be computed from and to the nearesthalfhour. The rates ... are basedon Contractor'soperationsbeing conductedon a sevenday wiek and twenty-four hour work day. The rates ... shall be fixed and firm for the duration ofthe Contract and are subject to the provisions of Appendix 10." Appendix l0 provided for rate adjustments in the event of the RGV not performing to the full extent of some of its efhciency-enhancingfeaturesor indeed performing better than expected.Appendix 10 is of some importanceas an indication of how the partiesthemselves"priced" the various featuresand will be consideredlater. "5.2Operating Rate. The operating rate as specified in Appendix 5 shall apply per twenty four hour day and pro rata in respectofany part ofa day' payable each and every day except as otherwise provided herein." The operating rate in Appendix 5, subject to any adjustmentin accordancewith Appendix 10, was 5175,000per day. "5.3 . I StandbyRate.The standbyrate as specifiedin Appendix 5 shall apply per twenty four hour day and pro rata . ' . and shall be payableexcept as otherwise provided herein : a) during any period of time that Contractoris unableto conduct operationshereunderdue to adverseseaor weather conditions, act or omissionof Amoco ... or failure of Amoco to issueinstructions. an b) during any period when the Drilling Unit's primary equipmentsuch as hoisting rotating or pumping equipmentis not in use ':" c) .... for 5.3.2ReducedStandbyRate. tn the event that operationshereunderare continuously suspended a duration ofseven (7) days or more due to adverseweatherconditions, a ReducedStandbyRate shall apply as specified in Appendix 5" In It is the StandbyRate pursuantto Clause5.3.1.a)(and/ormobilisation rate:5.7) which BAO claims in its counterclaim. of Appendix 5 both the Standbyand Reduced Standby Rateswere $169,750per day, thatis 97o/o the OperatingRate. "5.4BreakdownRate. The breakdown rate as specifiedin .\ppendix 5 shall apply per twenty four hour day and shall be payablepro rata after the first

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2001wL 1476198 (Cite as: 200f WL 1476198) Official Transcript Otft"iuf Transcript

breakdown operations hereunder are suspendeddue to mechanical twenty four (24) cumulative hours per calel{-ar month that which Contractor is obliged to fumish any item Conttactor to lTith of Contractor's equipment or due to any fuif*"'ly which no remuneration shall be paid until a maximum perioi of twenty four (2a) hows after hereunder and shall continue for and routine maintenancesuch as , but not limited to' ' ' ' testing the resumption of operations.The time requirid for conducting top-drive control equipment "' and routine fterein-after'BoP'well surface maintenance of blow-out prevention;;; this clause. rn the event that Bop and well control test maintenancesha' be excluded from periods oi,"tf"ntio",under rate and commence when the first attempt to test has failed equipment fail to test, repair time shall fall within the breakdown test has been completed'" ana snatt continue until an acceptable namely $169,750.Thus the effect of this provision was The breakdown rate in Appendix 5 was the same as the standby Rate, cumulative 24 hours in which "operationshereunder"were "susthat in each month this rate would become payable after a and would then be payable for a maximum of a further 24 pended due to mechanical breakdown of Co.rt alo.'s equipment" the first 24 hours of "breakdown" in eachmonth would not hours after which no remunerationwould be puiJto BAo. In effect rate,the next 24 hours would be payableat the breakdown affect the paymentsto BAO which would remain at the full operating protection to Amoco in the event of "breakdown"' and rate and after 4g hours no paymentswould be oue. rrrutl"ur^th" agreed provision also has to be read with Clause 28'1'b) (see clause 6.1.2) unsatisiactoryor materiatlyieauceo performJnce' The results in BAO being unableto perform its obligations for which provides for a right to terminate if a breakdown of equipment 30 days. it applies for so long asthere were defectsin the well There is a dispute aboutthe meaningof the clause.Amoco contendsthat or operated at the Arbroath platform' BAo control equipment on the RGV evJn if (as was the case)the rig never arrived to be undertakenand have to be suspended contendsthat the clause only applies when drilling operationsui" o. ure sought becameoperative.In my judgment, BAo's submission becauseof mechanicalbreakdown,so that in the evlnithe clausenever leastwould otherwisehave doneso' The clauseis is plainly right. Operationscan only be "suspended"ifthey have begun or at test before drilling suchtesting being a regularrequirement addressingbreakdown in use or, ilthe caseof the BOP, a iailure to BOP and well control equipmentdid "fail to of all drilling operations(paragraph64).Becauseit is part of Amoco's casethatthe at leastbefore 3 February1999(paragraph test test', at one point (24 December)at Rotterdamand no acceptable was completed life has the last sentence a separate and 460), Amoco also submitsthat whether or not it was entitied to terminatethe-contract rate" for at least somepart of the one producing "a nil meaning of its own which resultsin its application to that situation, so from "suspensionof operations" year period of BAo,s claim. I reject that. The clause has to be read as a whole. It exempts perfect sense.operations (if aboutto start or started)would time bui not if the test fails. That makes testing and maintenance It commercial sense. would produce a nil rate if have to be suspended the Bop failed to test. Amoco's construciionmakes no needfor impact or. u.ry relevant operationsand which would enduredespiteany practical becauseof a test failure which had no urgency to put it right. "5.5.ForceMajeureRate. period in which operationshereunderare The force majewe rate ... shall be payable pro rata after the first three days of any or u. set forth in clause 27 andshall continue until resumptionofoperations hereunder due to a force majeure suspended ""ur" until this Contract is terminatedin accordancewith the provisions of Clause28'" The force majeurerate was S166,250per day. Clause27 is setout in Appendix A. of "5.7.Movements the Drilling Rig. towing and anchor provide, at its expense, During mobil izationfrom Rotterdam .,. the standbyrate ... shall apply. Amoco shall vessels, crews...," handling with clause that the RGV would be mobilised to and from Rotterdamand in accordance This sub-clausetherefore envisages on and from mobilisation from Rotterdam. Amoco's obligation to provide tow boats 2.2 thatchargeswill be payable at least

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under Clause7'2' Amoco to could, at Amoco,s option, be passed BAO on payment to BAO of cost plus a 37ohandling charge exercisedthe option and BAO claims payment accordingly' ..5.7.lMobilization . Amoco shall pay Contractor the lump sum mobilization fee specified in Appendix 5 for the location shall begin mobilization from the Gulf ofMexico to Rotterdam.Mobilization from Rotterdamto Amoco's first drilling tow as specified in Clause 2.2 andending when the Drilling Unit is safelyjacked-up at the when the drilling unit commences spud equipmentonboardthe Drilling well location and contractor is readyto commencedrilling operationswith all necessary Unit...." This Clausetherefore also envisagedmobilisation to and from Rotterdam. Appendix 5 provided that Amoco should pay BAO a "lump sum" of $3.5m for mobilising the Drilling Unit from the Gulf of Mexico to Rotterdam as follows: ,.thelumpsumiseamedimmediatelyupondepartureoftheDrillingUnitfromtheUSGulfofMexicoand...sUo/oofthesum shall be due and payable immediately upon departure.The balance shall become due upon delivery of the Drilling Unit to Rotterdam." with the on Thus the lump sum was "eamed" as soon asthe RGV left the Gulf of Mexico but was payable as to 50%o departure ..delivery ... to " Rotterdam.There is a dispute as to whether this is referring to arrival at Rotterdamor debalancedue upon 28iiD above-As mentionedin referring to the words "delivery at " in Clause 2.1 (paragraph livery in one or other of the senses not think there is any needto resolve this dispute. statedin paragraph30 I do Clause 6 provided for the materials,supplies,equipment,servicesand personnelto be supplied by BAO. as "6.1 . I . Contractorshall fumish all items desigrrated "Fumished by Contractor" in Appendix 4' of 6.1.2. Contractor'sequipmentshall be maintainedin sound efficient operatingcondition at all times. Shouldthe performance unsatisfactoryor the general performance of work hereunderbe materially reduced Contractor's drilling equipment become becauseof Contractor fumished drilling equipment, Amoco shall give Contractor written notice specifuing the causeof its dissatisfaction and Contractor shall have a reasonableopportunity to correct the specified deficiency. If Contractor fails to time Amoco shall have the right to direct Contractor correct or to commenceto correct such deficiency within such reasonable to ceaseoperations until such deficiency has been corrected and in that event Clause 5.4 shall apply as ifsuch cessationof ofone ofthe kinds referred to in Clause5.4" operationshad been a suspension Thus, as appearsin a number of Clauses,a notification procedurefor "poor performance" was expresslyprovided for with its own sanctions; in this case, where there is unsatisfactory performanceof equipment or material reduction in general per' time, the sanction is the operationof the breakdown formance. On a failure by BAO to correct the deficiency in a reasonable 49). rate provisions, in effect leadingto no paymentsfor the RGV ifthe "breakdown" persistsfor 48 hours (seeparagraph Section I of Appendix 4 under the title "Drilling and AssociatedOperationsServicesPerlormed Under the Contract", setsout by which party and at whose cost the various specified serviceswere to be provided. Mobilisation to Amoco well locations (meaning mobilisation from Rotterdamas distinct from mobilisation to Rotterdam from the Gulf of Mexico) and Demobilisation "operations" are referred to and I think they, together with "Drilling Operations" or "Well Operations" may fairly be when it usessuch language. characterisedas the "operations" which (subjectto the context) the Contract addresses Clause6.1.5 relatesto the Well Control Equipment. "6. I .5. Contractor shall demonstrateto Amoco that a soundpreventativemaintenanceprogrammehas been and rvill be carried out on the BOP and that all well control equipment provided by Contractor hereundershall meet the requirements specifiedin Appendix 6.

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Page1I 2001wL 1476198 (Cite as: 2001 WL 1476198) Official Transcript Official Transcript

of drilling operationshereunder ' ' ' . . are new or like new at the commencement shall ensure that all Bop elements . and wear duly noted and contractor th;;o;;ytt"m-ith.tolerance ;;;;de*aken discretion a third parry inspecti"" "f be for the account of Amoco' at Amoco,s intq""t.n tttutt *td ,o,;i;*t prior . T$fi;;ii, any repairs required will be madi authority's specificationas identified ,,,*uru"toret, ai'rolo, ii" th" "".tirying Repairsor repracemenrorpurt to bri'g ?o;;; account'" such inspection wili be for Contractor's ;;tg The introduction to the Appendix stated: for Standards,, the welr control Equipment. Appendix 6 set out detailed..Acceptance for the to ifthe Drilling unit is acceptable Amoco that follow will be usedto determine ..Thewell contror acceptance standards indicates additional checksthat will be risritrat follows uK continental Shelf drilling and completi91 ;;;;.'fte.91e"5 audit ,'ovi" by an independentconsulting-company the action o-rauditors. Inthis'inJtance "o-pleted made by Amoco -"' thecroieourof all corrective "o.rt rye;;;i*"tt *.rt or action u.roiil.a u"""pt*""

corrective i' "irip*""i'i*1*Uit specialisingtt and contractor all agreed "f "ll rn"."ruttr'Jithe auditmaybe pr"r.rrt"dto from raised " ri.," requests ""aii....

requestsclosedo,,ti,'u,,us""admeframepriortoAmocoacceptanceoftheDrillingUnit.'' rle5algn is safety' A blow-out on a rig or the Bop or well control equipment. Theseprovisions point up the importanceof of the piper Alpha disasteris well known' dlneer to-Jt p"rror,rrel present.'fiJto.tor platform is potentiarty u, rightio inspectit, a right Amoco did not they t uJ ,t ..audif "no*or* , the '"nce,. aiso^, under Apthe right to "*p."ss HenceAmoco had ; " an ind"pe.td"nt consulting company "q"ip-""i. aing for Arr;; such. There is a dispute whether ffi;;;;" on the RGV' Nor exerciseas for anv other equipment ;;;ct t";; Amoco to pendix 6. There were.no c.om.larabl3 tt e RGV in any particular way nor entitling "::"{#."1":,::lilgq: to BAo were there any provrsions in the contractrequiring "o-*ir.io. substanceof the tests set out in Appendix 6 is addressed io T* * material, the participateo. u" inrroir"d in commirrioning. equipment "as often as and in the manner should test the uto*ouipr"*ntion later. clause 11.5.2 also provided that BAO instructedby Amoco's representative"' 3. In my judgment, the answerto the to clause 6.1.5 as arise in relation to clause The sametiming questionsarise in relation ty BAo' As it seems to me the control is also ,rr"-r"*"- The clause ,."ror-io trrtwell questions "quip**:'ptovided" refersto BAo ensuringthat by delivery diirt" ncv. The crause also is not..provided,, until the contru"t *rrr*"r"es equipment it says'Not mobilisation' ..attn" of drilling of"rutionr-- T:, *t1lt what all Bop erementsare new or like new the sameconnotation(see "o-n'ln""m",,t drilring. "iJi. io spua of t'e welr" has of not commencementof the contract,uut "o-*".r"ement must be and is testedprior to drilling' and at ot acco.a, *itt, alt ttre eviJencethat the *"tt "ont zo). rt arso paragraph "quipr.i'", ttiot" than fortnightly intervals thereafter' "o ..6.2.l.Personnel.Contractorshallfurnishproperlytrained,qualifiedandcompetentpersonnelinthenumbersand classificationsset forth in Appendix 3 ' ' ' '" qualifications' It is not allegedthat BAo personnelrequired, theirjob descriptionsand Appendix 3 gives a detailed rist ofthe wasinbreachoftnisCfa"s",saveasregardsthelackoftrainingonthePRS' Clause8.2 provided for Amoco to have contractor and contractor shall replace'at no ..theright at any time to inspect and reject for valid causeany iternsfurnished by repair such items"' *itt, it"*r'a"" of defectsor if Amoco agrees' additionarcost to Amoco, such items ,o ,"3""tJ right' Amoco did not at any time seekto exercisethis to spuddingof the well' "spudding" is the BAo with a well-drilling programmeprior Clausel0 provided for Amoco to provide of commencement drilling' criteria' Clause11 provided for various performance

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Clause11.2providedthat: with good oilfield practiceand ..The work contemplatedherein shall be performed in a workmanlike mannerand in accordance supervision herein provided to Amoco to securethe satisfactorycomshall be subject to ihe generalrights of inspection and pletion thereof." 'Ihe safety case" for the RGV and "the safety manclause 11.7 required BAO and its staffto comply with the provisions of discretion" to by agementsystem" established BAo (seeparagraphs106 to 107). Amoco had the right (1 1.7.5)*atits complete monitor and audit compliancewith theseprovisionswas to be drilled Clause 15.I obliged Amoco to provide BAO with "suffrcient rights of ingress"to the location where the well ..for the performince by Contractorof all work contemplatedby this Contract". BAO allegesthat the terminationofthe contract was a breach by Amoco of this clause' Clause23 is one of the Clauses(the other is Clause28) on which Amoco relies in supportof its contentionthat it was entitledto terminatethe contract pursuantto its expressprovisions.The title to Clause23 is "Unsatisfactory Performance". *23 .1" there is no Z3.2.Indeedit is obvious from the wording that what Although the sub-Clausesin Clause23 are all prefaced was agreedwas the result of deletionsto or changesin a draft or form carried out rather inelegantly. 23.1.1. reads: Clause ..Without prejudice to the provisions of Clause28, if Contractor has,in the opinion of Amoco, failed to conductits operations hereunder,including uny iu.t of its operations,in a diligent skilful and workmanlike manner for reasonswithin the control of of Contractor,Amoco muy gin" Contractorwritten notice in which Amoco shall specifi in detail the cause(s) its dissatisfaction. matter(s) complainedof or, having so conlmenced,fail to proceeddiligently to Should Contractor fail oirefuse to remedy the remedyto Amoco's satisfactionthe matter(s) complained of within a period of seven(7) days after the written notice is served by it, Amoco shall have the right, without prejudic- to any other rights specifiedhereunder,at its option either (my underlining) to terminate this Contract as provided in Clause28.1(d)." '.either" which is another illustration of the rough nature of the drafting. It is not suggested (rightly' There is no ..or" to the a breach of the clause.The 7 days despite the language) thatthe Clause provides that a failure to remedy in 7 days is itself quulifi"r the start olthe activity not its result. The provision, which must be read with Clause 28.1.d),thereforerequiresthat: i) In the opinion of Amoco BAO fails to conduct its operationsor any part of them in a diligent skilful and workmanlike manner for reasonswithin its control; ii) a notice which specifies "in detail" the causesof Amoco's dissatisfaction;and iii) Refusal by BAO to remedy those matters or failure by BAO to proceedto that end within 7 days or, having commencedto 'to Amoco's satisfaction". remedy them, failure to proceeddiligently to do so The only matter on which Amoco relies under these provisions is the well control equipment and particularly on the alleged it contamination in it. That is because is the only remaining matter of complaint for which it is said notice was given by a letter dated8 January1999,the only noticerelied upon by Amoco underClause23.1.1. There are disputesas to whether notice was ever properly given by Amoco under this Clause and whether the Clause stands alone or dependson fulfilment of Clause 28. The final words in my judgment provide an answer to the last dispute. Clause 2S.l.d) must be satisfied also: Clause 23.1.1 simply triggers its application.That constructionalso accords with the to .l to cross-reference Clause 23.1 . in Clause28. Ld) itself and with the reference Clause2E but not Clause23 in Clause2-I '

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6 : 1 (c iteas 200 wL 147 1eE) At$:'Xtt"fl"Jt: orficialrranscript

T;",.T$,''ffix11.";i5ilJ:1.',llr!:':L:yH,"il::i,l3s.:lffiliili'f,J 1ll*'rrl;i}}ffitr"fn 'il!:f

i,:[!-*ill^{tii}f$:i#il-4"}*p*T',,ff*ffi r,""xlu.r'r"","ff
;r;;h" in operations the eventof andto continue for responsibility theRGv Amocoto.takeover providefor eventualitv' clauses z3.r.z andr.3 p"v-"to to L" -ua" in that ;;; of BAo ;Jfinsolvencv days for continue morethan30 majeure of anycircumstance force Amocomight thatshould majeure. to trreperilJoittre aetav' for 11t!1,,21.3 fo';;;;;;; clause27provides force its well ui'ii", i'ii;me Amoco "r'*"1o"*r".d then,unless 28"' in provided Clause 'terminatethis conrracias to whatr eA'b it ieft in no doubtas

"28'lTerminationby Amoco 28 Clause is entitled"Termination": for responsibility accruingexceptAmoco's forthwith,wit| no liab*ities this c_ontract if: Amoco may at its optionterminate to itt" au'" of termination in tt'i' ;; to Contra#;; payments "ot't'uJ-*p b) a breakdown ai?i"","ar-"q.ripm"nt "r daVs ttti*V (fO) consecutive 91mye
that contract"t t"'t::i:':tt';?;'";;ilithi"

condition for'a nrelails neri3d belngI 1l:Ty-J1ffiiffilH#n majeure a)aforce ."sultsin contractor

of fora ;;tp1h' hereunderperiod

Hil::r#:::THi::H'"" i)iir*H-ii,.ili#,:3;-#nfi:i:Hyi[i";;.#::l',fr]:.'"i,:
i3:il'lJl"#i#Tffii';lJ?"0:il:"'orsuspendingoperationshe :i1;lil:,,",|trff
consecutivedays; " seven(7) days; ^ '--r:-(30) ^^prarions hereunderfor more than thirty

0...."

*nirri tt . language rn" orfaiisto"o*"n""iodosowithin7days'Itdoesnot -r*;;* 23.r .r .Soread, of the "r on"Jiii"t*"e in rheranguage inbreachifitfailso.."nr"rrorur"*tio.,tll"'"ii"ry-til"r",in"aa"a"i to action r."itt T" J;ung rg ot" n", when "ii apply "r.*""".a "oo that submits

latterhasto be readwith clause o) '.igr,tiv BAo is isthesame' Amocoreries.are.sub-paragrapt-rs.l].Te it'"titt" "d 2g.1on which u"""pt"a of Thetwo provisions crause "r""t i, am.r,i.i,lii, #JrTi-Juur",

*n,"nii,,,";;:;t:9.,Ti:ii#,'ff-:* i$l,j*l,Hliltf3"F'1h:fli c,auses " ,wo proceedailig"nttv torem-edv ffil$dfu",':l= tr'" "o"t'u't'BAo the.:i5::'.ffi::Hr:iffi;'"Ttt " to failure "":"
"""t"'i"

,J,TIJ;n:ti'twnfu**,*"i:"ff.::!:iiiif,:T$*:iil':il said"'Amo n'"'

;j:i?:xffff[T:i#Lr';"#."1*:,T,[f:,il*i]:iJ:tr;"iiJiT"illii;.""[;pii*i"'i
23.r.7.t;;ffi;Jo"ro"r,"i"riin"ieAo"*rai"i"""o"rorofwhatwasrequired judgmenttr,e.ationrr"-o?iruur" terminated'
being againstthe risk of the contract zz,z*o,)that the claim servedon November does a'ege (by a re-amendmentof Amoco meaning of these Clauses' he BOP systemiititin ttt" or inspect BAo refusedto strip down

ilflr:'S'.H:il:"-#;:1,':"mg,:':';"1'x[$[*"-t"'ffiffip:'

or-.p::l,lr and a) e) rb-crausesBAO's equlpr 1,11l;ffi"fl:"il:',:Tffi'.tffiXff:i;TJfffiffiril"T,:#:::li of "breakdowns"; a nil foi ttre ;;;;;q;;;;"t '"''-" "a breakdown"of *-""ii"'!
luires ,.t*r, 30 days. Tirus, in commercial in" ".r,i*o "on'uin"A to Orig' Govt' Works Copr. @ West 2010 No Claim

2001wL 1476198 (Cite as: 2001WL f476198) Official Transcript Transcript OfFrcial

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breakdownrate after 48 hours,termination after 30 days' well control equipmentunderthis Clause'That Clause23.I .b) gives rise to a number of issues.Again Amoco only relies on the its terms' The Clause fall be .within is presumably becauseno other extant matter of-complaint could_evenarguably -said.to which resultsin BAO being unable to perform its obligations requires(i) a breakdown of BAO's equipment,(ii) a breakdown at least 30 consecutivedays.Each ofthese under the contract and (iii) the inabilityio perform those obligations to endurefor such aswhetherequipmentwhich has never beeninstalledor first raisesquesti,ons three requirementsis very much in issue.The to be tested or operatesbelow put to the intended p.rrpo." can suffer "a breakdown", ani whether the fact that equipment needs ,.a breakdown". The secondraisesthe samequestionbut in a wider sense. BAo is I think specificationcan be said to amountto to preventBAo performing its obligationsviewed plainly right in the submissionthat the breakdownmust be such as in effect or drilling safely or with as a whole and so s.rbstuntiullyto prevent mobilisation or drilling or at leastto prevent mobilisation that the breakdown merely involved a breachof an obligation underthe contract;it It efFrciency. would nof suffice reasonable contract" which, I think, is of would have to have the consequence BAo being "unable to perform its obligations under the in the contract as a whole by BAo' There is directedto substantial,ron-p"#o*unce of the mobiiisation or drilling obligations are that the obligations addressed those presentlyin also a timing question. The presenttense is used which at least suggests view at the time the question is to be asked. breakdown in a number of items of equipwhilst I do think (contrary to BAO,s submissions)that the clause can encompass canbe a "breakdown" of equipmentwhich "results" in BAo "being unableto ment consideredtogetherl do not think there perform its obligati-ns,' in the senseindicatedunlessand until the item or items of equipmentallegedto havethat consequence was in fact never i, o. u." soughtio be usedor called upon in or for the performanceof those obligations.As will be seenthat that if the equipmentwas the casewith the well control equiprnent.Such a construction does not mean, as Amoco submitted, from the outsetand remainedso for 30 days Amoco would be without a remedy. It doesmeanthat Clause28.1.b) unserviceable results in, say, an inability to drill for 30 days ofthe "breakdown" and it is only ifthat consequence looks to the consequence use to be used or on any subsequent that the Clause bites. There is nothing uncomeither when the equipmentis first sought the mercial about that. A breakdown without consequencein terms of the performanceof the substantialobligations under meanthat contract would not normally be expectedto give rise to the ultimate sanctionof termination. Nor does it necessarily Amoco is obliged to take the rig on location and wait for 30 days before the Clausebites, albeit I do think the Clauselooks to a failure in useor attempteduse.if the condition ofthe rig were suchthat following delivery at Rotterdamit could not properlybe mobilised to Arbroath and/or commencedrilling there for 30 days after that was properly required of it I think the Clausecould bite. The question ultimately is simply one of applying the chosenwords to the facts as found. But the point remainsthat the proper functioning of the well control equipment was required for the performanceof BAO's drilling obligations and it is for Amoco to establishthat defectsin the well control equipmentresultedin BAO being unableto perform thoseobligationsfor 30 days or more. days. 30 days from when?As will be seen The sub-clausecan have no operationunlessthe breakdown lastsfor 30 consecutive purported to terminatethe contract on 19 Januarywhilst over 30 this point is also of real significance becausewhen Amoco days trad elapsedfrom the irrival of the rig in Rotterdam(which is the primary period on which Amoco seeksto rely), 30 days hai not elapsedfrom the date on which BAO wrote to make the RGV availableto Amoco and thus from the datewhen BAO submits land I have decided as a matter of construction) the contract commenced(see paragraphs28(iii) to 30)' Hence the that BAO did in fact make the RGV availableand so deliver it to Amoco by a fax senton importanceof Amoco's submissions December15, 1998(readwith Amoco's fax sent on December8 and anotherfax sentby BAO on December14) andthat the 30 day period could start even before the contract itself commencedunder Clause2. I . requiresthe breakdownto result in BAO being The latter submissionraisesa further question of construction. The sub-clause of The only express"obligations" which can arise before commencement the unable to perform "its obligations hereunder". in under Clause2 relateto "mobilisation" to Rotterdam. That obligation is itself specifically addressed the fint sencontract tence of Clause 2.1. No caseis made by Amoco that BAO failed to perform it whether through breakdownor otherwise.The conceptof terminating a contract (which is the subject of Clause28) when the contract hasnot commencedis both legally anci linguistically improbable. I also think the 30 day period is plainly intendedto be a period within the one year contractterm. It follows that I do not think Clause 28.1.b) was availableto Amoco as a basisfor termination of the contract unlessAmoco can

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wL 1476198 2001 (cite as: 2001wL 1476198) official Transcript official Transcript

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establisha caseon the facts that days before 19 January)'

..delivery" in the sense which I have referredtook place no later than 20 December1998(30 to

Clause 28.2 provides for termination by BAO: by AMOCO ' ' "" "This Contract may not be terminated by CONTRACTOR except for non-payment provision with the provisions for terminationby The non-paymenthas to persist for 30 days after notice. Amoco contrast this the contractualregime is not exhaustilg' and Amoco which are not exiressed in such exclusive language.So, it is submitted, loosely be termed.afundamentalor repudiatory for what may law to terminatethi Amoco retainsthe right ut "o.rtru"t "o--on but that it hasto be readsubjectto the breach of contract.BAo doesnot contendthat the common law right is wholly excluded thaparameters for what could amount at common law to a recontract, including its expresstermination provisions, setting ambit of clause 28 then Amoco is pudiatory breach of it ani to a submissiontlat if the mattersif complaint do fall within the indeed limited to establishingstrict compliancewith its terms: see paragraph104. includedEnglishlawandexclusivejurisdictionclauses(31'l);a clause30gaveAmocorightstoassignthecontract.clause3l contractand (31.4)Ja clausepioviding that in the event ofconflict or inconsistencybetweenclausesofthe non-waiver clause (31'7)' the Appendices,the former should prevail (31.6) and an "entire contract" clause of Appendix 7A provided for the observance statedminimum safety, health and training requirements' ..performance criteria Rate Adjustments". The detailed provisions are of some sigrrificancein Appendix 10 provided for to the partiesappear considerationofthe complaintsabout the PRS and training asthey place them in the context ofthe "price" featureswhich were critical to "achieving have put on operation of the equipment. The Appendix .!co.ds ttt"t ttt" RGV has of thesefeaturesand provides maximum opeiational effrciency''. In generaltenns clause I of the Appendix setsout a number "a variance" will be recorded.Clause2 provides for the partiesto agreewhether that ifthey do not operateor operateproperly be reducedfor the duration an event constitutesa varianceand its duration and if they do so agreethat the operating Rate shall I hour by $15,000 for all the featuresset out save one, namely the pipe handling system,where the reofthe variance over was that ifthe RGV did not duction is $5000. As Mr Gillis and Ms Turton acknowledged,the practical ef[ect ofthese provisions for a standardrig at the time the contractwas perform to its high specification,the rig rate would be reducedto the market rate negotiated. and Clause4 of the Appendix provided that a vaiance reduction should only be made againstthe operatingrate ..regardless cause,the time of any variance agreedto pursuantto the provisionsofthis Appendix I 0 shall not be considered of as a mechanicalbreakdownor failure on the part of the contractor as set forth in Clause5.4.1 of the contract." were two such Clause 31.7 provided that the contract could only be varied by a specific form of written agreement.There 23,1998 and by Amoco on April 21, l99E proihe first (Appendix A pages23 to 24) sigrredby BAO in March agreements. That vided principally for two cantilever extensionbeamsto be provided so that "cantilever skid out" could extendto 85 feet. the expectedwells from a cantilever extendedout over the Arbroath platform and to do so was to enablethe RGV to drill all without having to move position. ofthe Denick shakersreferredto in Appendix The secondvariation (Appendix A pages25 to 26) provided for the replacement 1 to the Contract with Thule shakersto be supplied by and at the expenseof Amoco. Both variationsprovided that "except as specifically amendedherein, all terms and conditions of the contractremain unaltered and in full force and effect".

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16 Page

1e8) wL : (citeas 2001 1476 3Tt:tn.:T:llol o'u"' rranscript "

of in delays completion theRGV caused two that-th.e variations thatthe in the pleadings it BAo a'eges because tttisprovision' is iaid' means ili""r* r referto this provision asthe contract i, ai.put"i tv-ii'"'." u*rr rr.fTt " Thar saidthat for whichAmocowasresponsible. f"t""lW Vfarcom'ho*tu"'' to in urr!)li [il"*"J l.-n'ff I ..anticipared,. ir-* issue do not feelit necessarv urriuutautl'in Rotterdam Cf i"*init *ging rt. r"irtl aia ,rotoccurto rri*,J*i"-[ .i"t aut"-ii no contained delivery Law at n*ner'Termination Common and issues evi"iJt"tt thetechnical so thatthe consideratigl.of I in havebeenmadeon this issue think, ;;;ld;"Jio in orderto succeed its case submissions establish Althoughdetailed iri"fly what Amoco need,o,o o-,ri I in can dence be seen context, onry to terminatethe contract' that it wasentitledat commonlaw ask courthadto InopeningAmoco,scase,MrBarnesacceptedthatthelanguageusedbyDip1ockLli:ry l.roiption of thr qu"'tifrihi"hthe the to rescind 2bB261tj^-::l1i;i;;#"ppropriate risen Kaishalle6-jr at the dateAmoco purported wasaki *ilili"i of to the circurnstances this "ur", likely to occurrn thrwords turtherdelavwhich was itself, namely,adjustrng o"".ro"9;; BAo *ht#;;;."uiv ";v takln togethersuchasto depnve" any contract, derayo, o"ruJ'Ju" to iJ.";vtt"" or sao_ in'."i"*. a rt "r" d"f";i;; obtain"fromthe contract' rectifuing that defauu,"Jirrl ""ra""t o** Amocoshould i't"ntion ..of substantiallythe wholebenefit*hi"hit ;;ii" "tin" Amoco thatthe right to (andrightlr.in mv judqnent) submit 9?)18.+o did not in the event BAo (and (paragraph provisions' indicated it' As I havearready contui-nini own termination ui *ur." ortne contract it was ru* at definitiveof the'ibenefit"which terminate common ** *rJlyexcluded ando*,ei irovisionsof the """r;;;;;6oth the gravityof anydefault wouldbe which rru-ir ri", thore Amoco)did of course .f th;;;; l"t-"rrl;;li*ri"" provlsrons "f su6missions contractual obtainfrom tt. "the rhat intended Amocoshourd "oot of tu*. e, it wasput i.r e,oo"o t i;ing for at common provision a period to to necessary justify *.-ii*i* Thebenefit Amocowasthe asarr" regarded of theparties be capable driltingin the to give a pointer what *d -un r"a soasto ""r*"r"i"frealities". a"" #" Jirr,.tg o' "ri, "q"ioo"i oneyearcommencrng ih" "o.*encement from the freld' field to ,*"ft to'u"tti"uefurtherproduction Arbroath in by orperformance reduction effrciency for Am^oco reduced for rate its bv a breakdown reduced itselfcontained own scheme compensating ror uno Thecontract reducti"" i;;ff"i"r"v J perform;;a;ilir *hi"h *"rr effectiveaftera rate rheoperating for tn" f".ioa of the its-ownp.o"iJ*t ior termination alsocontainedincrause2g.i lasting30 daysor a contract to a nil rateafter4g nouis.It to p"rr"t- it.'"iiigutionr uno". the form gravityto cause mustin myjudgrnent of thtmselues breakdown sufFrcient "e.o^*"i1"*uui" 30'd;y'' tn"t""ot"%il"s f*;;;;; within otherwise u ,urf,"nrionof operations Thuscircumstances majorfault causing aoiu" to* itrecontract. p".rig1.".iiri"J"Jt" t""#*[" partof anappreciation "r",i.

t:".'d!lll"*i{:*:**'#*t-,Hn'"Tffi11f::,tilil:T:"'5:*:l: provision'l1 parties the orthe scope termrnation ;;;;;d the how crrcumsrT;r ffiil i.,r, and such ;;; 1s":_d_y*. ;ffi :l ::.Jffi ffi?ffi llffiff "i tdi;t!Beee;j:*j**ltTn,::::,,i',$3."ffi1:$:".Lockrand Ltd see sequence: Bu'dersvRiekwqJ;i;;i)

i**,";*1ffi
:S"J[:,::,"#;:H;ffii,rT;;;

the Arioco's case sought to emphasise i.,'r""ognition of that.reqii'"*""i'fto refusal or failure of BAo to provisions would be ,"q.,ir"a. No doubt it *u, the alleged we' control in ir,rroiro"a the jacking ,vr,"* "ia "q"ip-".i-"ta itr"t on ri January1999 it was not safeto safety considerations *"r opening, a-o"o,ii^" Burn", p-, iii, replv closing written tn Amoco's explain mattersor rectif them. As M.

;il:I"l,-,:ilrl'::lllrtrixir*t'5;n::*ri*

u.a platform eao *us tefuiit'gto t*,ilJll;":"r,1*' the take RGVoutto rhe'Arbroath been: are to [,n'in","a *'e contrac* said have

-- meantthat therewere serious fa'ures .- despiteBAo's assurances ..Thereoccurrence ofthe we* control andjacking system had legitimateconcerns'But BAo *l rl*: operatorexpent *ri before the rig could-beused.'Both addressed to issues be more to be done'" it' obligations and that there was no maintains,evennow, 'n"t it n"a -? o'renunBAo submits that repudiation by difference in the parties' submissions. of ance' Amoco submitsthat This formulation illustrates another area r" t"rmea r'"'p.dt;;;;i rr""-, *t 1t-"";ryrr"t following' I do noi think it of a contractis different in principle and iation,, purizs-nn "t*"y i, ct ittv on cont u.tJV"r. r, of it may be refwo at reastoverlap.The question is discusseJ '"t"al to perform a contractor part this case' en oit"" of in the circumstances cessaryto analysethis fufthlr

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2001wL 1476198 (Cite as: 2001WL 1476198) Official Transcript Omciat Transcript

17 Page

a breach of contract may (as Amoco submits)be repudiatory; likewise in my judgment a refusal to remedy or acknowledge as evincing an intention no to u" so it must amount to c'onduct which objectively is characterised repudiatory. But in either the whole benefit which it was to obtain "ur. party of substantially longer to be bound by the contract such as to A"ptiue the other q.rertions may arise as to the other party's failure to invoke contractual from the contract. In that context, I think, ro, "*o:-pi", to acknowledgeor remedya breachis a reasonable rights such as a right to require work to be done ani asto whether a iefusal it cannot be right to seek to characterise a assertion of rights unoer ihe contract rather than a repudiation of it. ^certainly obligationsunlessperhapsit can be shownto have statementof beliefthat equipmentis fit for its purpos" as a refusa!t9 ne$rm of degreerequiring rr"ta, seewoodaiv wimpev [1980] i wLR 277 . Ultimately it is a question been dishonestor unreasonuuty considerationofallthecircumstances.Thati,,l ..individual demerits" oithe owners conduct wire suchthat it was held to go'1o the root" of the Inc [1979] AC 757 where the for need of the charterers the bills of lading it particular contract and particularly so because went to an immediate commercial which the owners were refusing to provide. The Legislative Framework is and commercial considerations of course The vital importanceof safety in the Nonh Seaand its precedenceover operating regulationswhich governthe safetyof not in issue.The goveming taw is ttre Health and SafetLat Work Act 1974 . The specific (safety case) Regulations, 1992/2885ro and responsibility ibr offJho." working in I-IK *"t"tr "* 16s Offshore Installations ..the scRs,,. The basic approachis to m"ke th" o*t of an installation responsiblefor identiwhich I shall refer as "i/op".utor how to minimise them to "as low as reasonably practicable" fuing risks (..major accident hazards") and d^etermining Safety Management (.ALARP.). The Health and safety Executive (HSE) is given authority to approve Safety cases and Systemsand to audit for compliancewith them- As Mr Possput it: to ..[n short, the regulatoryauthoritiesdo not tell offshoreoperatorswhat or how to do something,but they requirethe operators and relevant personnelto live tell them what they plan to do, assurethem that the plans are safe, and then expectthe operators by them." where (as would have An approved SafetyCaseis required for both fixed and mobile installations.There is also a requirement with different owners and Safetycasesare been the casehad the RGV gone to work at the Arbroath platform) two installations Case have approveda Combined OperationsSafety Case(COSC). The COSC and any Safety working togetherto prepareiand and seekto reducethem to ALARP, Safety-criticalelements("SCEs") have must identifu the major hazards,quantiff the risks is, as one would expect, to be identified and written p.o""dur", provided to ensurethey are and remain in good condition. There jacking system and the well control duty to keep safety mafters under review. There is no dispute that both the a continuing systemwere SCE's. of any legThere is no need to set out any further detail about the legislative framework. Amoco does not allege any breach gave evidenceon behalf of BAo/Rowan that the islation or of Appendix 7A to the contract. Nor was it put to any witness who document company or the witnesswas or would have been in breachof any legislation or the Appendix. Nor is there a single Mr Barnessoughtto put it was that had the RGV goneto work at Arbroath in the which refersto sucha probability. The highest to ALARP. It is also state in which Amoco say it was at 19 January 1999 then the safety risks would not have been reduced Chroworth stating that these oiligations apply to both gAo and Amoco and the SCRs impose a duty to co-operate.General nologylgg5 To Departurefor Rotterdam on or . Rowan contractedwith LeTourneaufor the constructionof the RGV on 24 October 1995 Delivery at that stagewas to be including Amoco. The to various companies, before 30 June 199g.In aboutMay 1996 Rowan madea presentationof the RGV .the mostiechnologically advancedmobile platform unit constructedto date". In July 1997,following RGV was promoted as quarter 1998. un upp.ou"h from Amoco, Rowan submitted a proposal for a one year programme starting in the second/third ''high" but in the event there was not as to whether the day rates quoted and in the event agreedwere There was some dispute high at the time) much in issue.The rate was "high" in the sensethat it was somedegreein excessof market rates(themselves of the RGV. The extent of the effrciencywas but it could be justified by the supposedadvancedcapabilitiesand so efficiency RGV of reflected in Apiendix tO, ttre adjustmentsto the rareigreed in the er,.ent "variances" affecting the performanceof the (paraglaph 95).

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Pagel8

: 1 (cite as 200 wL at&:,X"t"#':fr: orficialrranscript

6 147 1e8)

was c'rinformed Amoco that delivery September.rggT,Rowan had contract provided for the "anwith Amoco w1s siqned on 26 The At the time the contract slippage ;ffi-i;;;;er' rsss with iilJp"rriuiii'v of ',i:ffi;fi;a"* rentlv expectedto be in September 2'l' clause

projectwas about9 to 10 months'Therewas to dri' the ArbroathInfill time required contract asmight not be in Amoco,sestimate lggT of the ..overh"ir;;p"ri"o t", ,,r"h_pj-nof the oneyeartenn of the of or to to BAo for an io, L-o"o aloneandnot anobligation the thereforeo coirmitmentwu, u "o#iio;i, "ommitm"nt to Rowan)that trrutoverhang (communicated requiredfor Arbroath.rur*"o*, ,rro* trrut it *-, i-olols int"rrtion implies'a The with the co-venturers. docrrment-s-urro otherthan Arbroath' As its name be shared well" at iGation of lirst to drill what il "a]I.J" A*"Jo*' newrig andtheabilities the of a RGV shourdbe used u" drilledsoasto #;ttil";orking RGVto *t i"i well usingthe well shakedown is anuncomplicated at thistime Amocoenvis-aged "u., Mr Gillis *#;;il;o"'*"r,tr.r,o*ihat it to opti-r* pt":i""t' ry craiz said'andthe documents crewto use uJi"rr"d to b".u., "*iti"u "ti"ct. Infill which*"r'it or u*"Jire to the Arbroath "" drill sucha well on the Appletonfield -"ll rd;;;;"'"'J""aii"t r9e8"'In drilling first.o;;";;;;;r*" November RGV "commJncing-in show,that r.,t"rprir"inuiai-ii " eii*",r, p."jJ;;;the *ulroonn'g.ii" i;;;A;";" project.rn September not startuntil 1999' 1998it ** t*oOi*a if'"t tft" proiecimight January the sea'The at LeToumeau's-yardvicksburgand between on Pass to passunderthe bridges the Mississippi ,i"", i.r r"*"h andthen saileddownriverto Sabine The rig wastoo large * it equipat th"";;,;;lk;Jof " andthe installation the drill floor intentionwasthat it *ouia be part bu't i.,"i,iiirg *lrirrrr," *"J;;;;;'l"tr the work on it wouldbe completed, where ment. theriverhad at vicksburg.walking the hull to wa,s whilst construction proceeding It agreed 30 June' is a 18 to it tookplacebetwe-en and Both Addenda the confractwere 'h;;; on a tulcrumof of the contract,. ff" ol"4;;jJri13^1'; forwards at beenscheduled thetime i" -ir"i,rrr rigis revered the inyolvlng ;;;;, of jackingop"*rio]^ jackedup causing procedure remarkable somewhar i""t uiuti-" uith" bo* tegis " i"Ji"iina tne atr"gs,-uni-or.J.;;r,"ir'r"f "i;; turtherforwardeach time' o earth,placed rn" "i a few feet *,"*ji;;;";;e sternof the rig to piv;;;tn" "u,tt, "na is A of theRGV to Arbroath' Hazop wascarriedout for the mobilisation to and (Hazard operability)study arenot considered be and,if they In Junel99g a Hazop io".itin"",]1". ii aro ia*in'J, l'n"'t"r"g""tas covered tou" of the RGV to its for procedure hazard tht a well established dated18 June worksheets *" hazop is wouldbe shutdown' depressurised a recommendation ,nud" """oriin;r; adequate, iri", rr," pi"ii"r. *o pipelines tests and in" final positionurongria" Arbroathor"*#.?*""ro"o iorJu.ot:.* r'o operations pre-load equipmentl".".rilii"^ncv. in of "delays of tugsandpositioning and t''t'" anddemanned, theuse uy ..fait,rr"'o?;""r.rrs -",rri' *i "or""qu"nttt tug boats and f"ii;;-;#*a huru.dof equipment thrusters' ';;;;;y at the platformthe of jacking 'y't"r" *as shown'as-addr*J; il"rur"g.rura, "f jacking op..utions,, anchors." and Mr Johnston, Mark Jones Mr Mr Mr included Gillis, Mr Hosie, steve team by wasconducted a highrev_el which TheHazop BAO/Rowan' Priceof AmocoandMr McDonaldof ThetowdownrivertosabinePassbeganon2lJulyandtherigarrivedthereon26lu|y. would not arrivebeforethe endof NoAmocowasgenerallyawareofthedelalstotheschedule.MrCowieandMrGillisknewinMarchtherigwouldnotarr rra{i3""_1,1 rtt Eiirit knewit a of october.u, f9r prepared and.at meeting rero.eth" Ronerdam "iiri"il Apoco tin purti""r"r i1$e $gcuyents ".d no. the was in deravs getting rig to No vember. complaint made; rurprlr" "xpressed.thatpdi;;;;oithe risk of weather ti!-coienturers to Arbroath to persuade heldon 28 May 1998)sought ;;;i;f.r"bl" totake the rig straight .onttr:]ffi;il as from latei delivery"rrrr" igi" rir" ,rint". arising no well which couldserve a Arbroath, ,',',ij"t:::,To ,rt"r Cr iirrr i;;; ; to weu els"*here;,:;'t"; F'nterprise a reluctant a shakedown and not <rrill useato persuade the argument into rirr"oui'io had well. Appreton not ;hakedown Amocothat it wouldput resources "*p"aatr3ns,"3l^of dafetyr,xecutiveiwa,u f"roporaby inefFr' this .ourse(andto satisf thert"uitt, and on arrivalto try to avoid startup upport ilGv *u, nrriv ," seeking "#*r;sioned rd be crosellinvolvedin ".r"r.-iil*n.

I Augustto l5 october: from "iotr*-J.v

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Page19 2001wL 1476198 (Cite as: 2001 WL 1476198) Oti"i"f f.""script Official Transcript

equipmentbut gave Amoco no rights in for acceptance-{a*ard: for well control personnelat ciencies.The contract provided (Appendix 6) led to trre.prese'ce on the rig of ADc and Amoco *;;*sal respect of commissioning or testingotherwir". Rotterdamin mid-November' It also led to *iil ir,'" ,i! *"s mobilisedio -orr" to Sabinepassin Septembei199g and thereaft", ttre RGV and satisff ABS and DNV and had confident in rt, oJ' abilities to "o--irrion some friction with Rowan. Rowan felt a procedurebeenusedfor ADC and Amoco ro"gttii. "uolve. Nor,hadsuch never usedor neededa documentedprocesssuch as involvement with Mr Gray, *tro *i, in day to day chalqe of Rowan's the RGrv for which Amoco was also the first "u.a.n"r. ttow it should do it and' when it sitoua io and knew what tt e the rig, was wholly convincing in saying that Rowan "quip-"nt with such a procedure. It was no surprise DNV and ABS wer"'utro was ready, how to prove (or not) as much. Moreover "orrt"nt not pursuedwith others' processwere after Mr Gray's eviden"" it criticisms of the commissioning " operations at Arbroath" with a.?aper,' entitled "Rowan Gorilla v welr Thus, when Mr palmer was supplied by Amoco Gillis on 9 June1998 statingthat Rowan was fully hi wrote to Mr (preparedby Amoco r* *" rrr"y ileetin! with co-venturers) in rfit fo, purpor"i una did noi require the intenseoversightsuggested the Paper.He also said tt encv capableofdelivering NoneoperateJherewould be no financial obrigation on Amoco' to that until Rowan was satisfied that the ncv was ready AcceptanceTest Report'which July 1998 called "Drilling systems theless ADc prepareda substantialdocument nr"r""ii" of by ADC and Amoco for their assessment the RGv' becamethe basic *ortittg ao""-ent used first submittedon r June-Also in september I 998 the which hud !:"-" on 1 septemberthe HSE approvedthe RGV lafety case HSE approvedthe coSC on ..combined operations safety case" (cosc) was hnalised'.The issue of the Arbroath and RGV drilling. new wells through a fixed inthe hazards *a ,ir[, .iring from 1 mg'ife rig installation 13 November. It addressed prior 106-r0t. It is a formidable document' It spelt out that stallation and was preparedto comply with the icRs {Plae,uphs Managers io.rnJ Arbroath the pratform ana-\!v offshore rnstallation to arrival of the RGV in the 500 metre safety ,orr" were to hand over tg respectivelybut once within the 500 metre zonethey (oIMs) had full responsibility for the platform to the oIM for the combined "rJ and-ihe security of the installation responsiblity for the safety health and welfare oif"iro*a Installation(.theComplexoIM''),whowastobeMarkJonesofAmoco(orhisalternate,TonyMahoney)' jacking' on pinion broke.on the gear unit at 88 while the RGV was on 17 Septemberat Sabine Passa tooth on a Yapitch teeth by personnelworking on the rig' The found to have broken September25 two more vspitch pinions, E3 and Lo *"." tooth from E6 was never found' Thesepinion was found lying in the il;;t"g of the geartrain. The broken broken tooth from E3 jacking system' iailures form a significant part of Amoco's caseon the included thosepresentat the JuneHazop (paraThose^present on 1 November lggE a Hazop review meeting was conducted. presentfor Amoco on this occasion'There were no revlslons or graphs I 14 to I l5) savefor Mr Gillis. Mr Quldey was also is, as Mr ncv tg Arbroath or jacking it up there to drilling height' That material changesto the worksheets for nlotiritL at SabinePass' Mr McDonald the pinion failuies discovered Bartle agreed,evidenceof the lack of corr""*-ut the time about was Amoco's main point of pinion failures were not referredto at all at the meeting' Mr McDonald said, and I accept,that the pinion failures until after 12 January1999' aware of the contact with Rowan/BAO in Aberdeen and he was not even ..complete" when it left_sabinePassand that it was then contemplatedthat work There is no dispute that the RGV was not Rotterdam. ADC had taken to issuing "Advanced Recomwould continue on it not only during the tow to Rotterdambut at pass.Thesewere reviewed at the beginning of November and a list preparedby mendations',to Rowan about the rig at Sabine Action Requests(cARs) to be completed on the tow and ADC of those still outstandingwhich were divided into corrective to Mr Quinn and Mr Snow (copied to Mr Cowie and Mr Recommendations.Mr Sleightholme (the ADC teamleader)wrote report updatedto the current status,with actions Hay) on g November attachinga copy of what he called "the commissioning interiL report. Mr Sleightholmerequestedretum of the ADC recordedas completedor outstanding,,.I shall refer to this as the letter added that "at Rotterdam,the latest commissioning documents with Rowan,s comments aaaea uv iJ November. The The ADC interim report is a documentof some importance'So statuswill be reviewedand outstandingactiviiies determined." to u'hich they relate' far as material its contentsare consideredunder the particular headings to Mr Quinn and Mr Snow on the next day (9 November) Mr Slerghtholmeprovided the list of CARs and Recommendations prior io acceprequi;e correctire action by Ro'"van accompaniedby a leffer which describedttre 1i+; cARs as "actions which

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20 Page

wL (cite 2001 14761e8) ,"T-1.*lrl-,1r:ffiofficiat rranscript as:

'}*x,r**i g.f$,g**ffigfiffiH*ff ffi

November and to tne I

m,:=1,1t*i"xis"l*llrffi'ilf#::ffi#ff:8"#ff*""fi"::ilJt":ffi:;

*;*'lltrlkl*g #nuh*:;i;
ffi;; at the time was r 'v !" * of the oroer or o be Positionedin

.f#i:.l$:i-#m$H-.*-lt*-*beenar.undglsbb,=;

'r*i*:}rT *h:$q-t:*fi*i'*ti{i*ftlru
there were c( I January1999 the groups.until ^^^,rmerser of RGV

rt the ,H$[?:11?i:l.T:l$m;m::T"11,""*'l':i#ffi:" ** ao"qq:lf]il,lfi.Dec

'd*.;*;l*i*-i*t""w
n:*irit'iii:lipilq;T"T."':
delivered at Rt

l;.[{;il':'.{fiFr{fi:{i}.'#
:i::ffi::.T""T"':;iilJ'iuning oilprice' :-^^rezrr! the show concems "o*l

*:::'^tl^"lt'*,,ltil5L"::::

lffi:'J;$::+;l';::'i*"'"13'"""J1
LUourr'"' -- They each retuseq reduced day rate' a

:'#fu::"'u

- ' ^-^: n +^ Mr Fowler' the Managing

Director o

l,^*"co'd

2010No Copr. @ West

Govt' WorKs Claim to Orig'

2001wL 1476198 (Cite as: 2001WL 1476198) Official Transcript Om"iut Transcript

21 Page

29 October: five well infill drilling ..Enterprise oil has for some time been concernedabout the technical and economic viability of the programmeandfollowingsfudieshasconcludedthattheAmocoproposedprogranrmecontainstechnicalriskandiseconomically unattractive. be the opportunity to terminate the rig contract. we should rt seemsto us that the late delivery of the rig may give Amoco is not a realistic option then If we concludethat termination grateful for Amoco,s views on the point in advanceoithe meetings. with Rowan owners Amoco seekto do two things: it is Enterprise'sview that in the meeting suchthat the contract is considerednull and void ifnot l) place a deadlineon the delivery date of31 December 1998, met. rate to a significantly lower figure in line with current 2) tn considerationof the late delivery of the rig renegotiatethe day market rates." in similarly emphaticterms on 4 November: Amerada Hess (Mr Gugen,the Managing Director) wrote to Mr Fowler ..The Arbroath Infill Drilling campaigp has become, in this continuing low oil price regime, an economically unattractive or enablea significant reduction in CAPEX that proposition. It is AHL,5 view-that we should i.rJ"nttit"ty pospone this p-j""t proceed' would make the project attractiveand allow the campaignto is via a reduction in rig day rates' Our view is that the only viable way of making a significant CAPEX reduction that Rowan believe cancellationof the contract In order to achieve a reduction in day rate we must position ourselvessuch could follow, shouldthey be unwilling to negotiat' To this end one option would be to immediately telex Rowan and instruct them not to load the rig for transportationto Europe'

rate. In the current climate $175'000/dayis unacAcceptance of the rig should be predicated on negotiating a suitable_day cannot supportratessuch as this' ceptably high. The risks and r"*uid, associated*ilth ttt" AlrbroathInfill Campaign and we must be preparedto take a very firm Rowan must understandthat we cannot afford to proceedon the current basis stanceon this." that "in terms of (Mr Wiggs andRobert Johnston) Within Amoco, also on 4 November,SteveJohnstonwas telling his superiors that the delays,weatherdowntime potential, is what to hit them with, cancellationseemsto be the only optionlthe bottom line just a reducedday rate. They got the deal as being the have made the original deal unattractive. There is moie to this than etc only show in town and failed to deliver". for Amoco and Mr McNeaseand Mr The meeting on 5 November was attendedby Robert Johnston,Mr Wiggs and Mr Gillis recordthat Rowan said a contractwas a contractand'the rig \Mill do a great Marcom for RowadBAO. Amoco (Gillis) minutes possibility'" job,,. Amoco,s stancewas that "if we cannot get a rate reductionthen termination is a very real in writing the concerns expressedat the Following the meeting, Rowan (Mr McNease) wrote asking Amoco to confirm the Amoco (Robert Johnston)did so summarising "the primary issuesraised during meeting. By letter oatea t0 November Enterprise'It repeatedthe late Hewitt of meeting,,. The letter was copied to Mr Aquilina of Amerada Hess and Denise Dass weatherpoint and continued: arrivaliwinter ..Since the rig did not arrive in the appropriatetinre frame, Amoco and its co-venturersnow wish to indefinitely postponethe

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2001wL 1476198 (Cite as: 2001WL 1476198) Official Transcript Om"iut Transcript

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drilling' The economicsof this prior to granting their approvalt9 b^e91n the drilling programme,or re-negotiate drilling contract of the rig hasworsenedthat situation' negatively itnpu"t"J oy io:* oit pi""r, uJd th" late anivat drilling programmehave bee-n to ttr" ioint-of making the drilling programme undesirable'" of the Gorilla V contract including negotiationof rate and term"' The punch line was that Amoco wished..to open negotiatiorrs delivery" of the rig' In the meantime "all rights" were reserved"arising out of late prepared for departure from Sabine Passat this time and ADC's BAO makes the point that although the RGV was about to be the letter saysnothing at all aboutthe stateof the RGV list of outstandingmattershad been suppliedto Rowan on 9 November, from an internal Amoco note (RobertJohnstonto Mr Urban) itself. The complaint is delay and only delay. Indeed it is apparent RGV would be ready to start work by mid-December and' dated l1 November that it was then believed by Amoco that the programmewould move forward' Amoco was also seekingoutsidelegal granted Rowan was willing to negotiate,trre oriiting advice on the contract at this time. (correctly) that Amoco had known "for an extendedperiod of Rowan (Mr McNease) replied on 12 November. The letter stated tggg', statedthat the rig was expectedto arrive at time that the delivery of |orilla V would occur during the Fourth'Quarte.of the ..fully operationaland preparedto operationi for Amoco", and that there was no basisto renegotiate Rotterdam "o-*"i"" terms of contru"t una Rowan expectedAmoco to honour its commitment. Mr Gillis, in a letter signedon his behalf by Mr On 13 November, and apparentlywithout referenceto this exchangeof letters, work at SabinePassandto uncompleted Hosie, wrote to Mr Marcom. The letter referredto "the excellentworking relationship" by statingthat "additionally" Amoco was "specifically on the rig much of which was detailed in the cARs. The letter continued to these items on 24 November' The five concemed,,about five items which neededimmediate attention. Rowan iesponded items were: was that no and Rowan'sresponse i) The needtbr a cantilever load test. This item forms no pan of the presentdisputes such test was required. which also forms no part of the present ii) A technical query about an auxiliary brake known as a Baylor Eddy Current Brake in disputesand was fully addressed Rowan's response' was not likely to be completed iii) The implementationof a Rig Floor Equipmlnt Zone ManagementSystem (ZMS) which did notlnclude a requirementfor a ZMS' Amoco's pleaded before the rig arrived in Rotterdim. It is agreedthat the contract for safety. A zMS is an eleccase in the proceedingswas that without one there was a greaterneed for training and concem straying into areasin which people tronically controlled automatic system which prevents eqiipment collisions or equipment with the situation and that it was ultimay be working. Rowan,sresponsewas to say that the ciews would be trained to deal of caserelating to the absence a ZMS' any mately intendedto install a ZMS. In the courseof the trial, Amoco abandoned noJa concernpursuedin the proceedings' iv) Rig Electrical Supply. The concern was "power spikes". It is be achievedat Sabine the v) crew Training. The lluer stresses importan"" oft.uining and statesthat it was to be but would not had been made was to say that arrangements pass, and a new plan would therefore need to be formulated. Rowan's response to provide documentation support to with equipment manufacturers run courseson the drill floor equipmentand that it would now pursuedrelatesto training on the PRS' the training provided to date. As stated,the only allegation in relation to training 20 November,such mattersas had Thus, when the RGv left Sabinepass on 16 November and left Freeportfor Rotterdamon on the PRS' have all beenrecognisedby Amoco at been specifically raised about its condition, with the exception of training least d be of insufficient sigrrificanceto be pursued in theseproceedings. a survey a report had been on 20 November lggg ABS issued an Interim class certificate for the RGV certifiing that after The certificate was valid until 20 January1999pending rectification submitted that the RGV was fit for the service intended. The only material outstandingitem to establishclasprior to commencing operation of an attachedlist of recommendations. verifr waters was "function test Koomey unit has ability to close all rams and valves on BoP, sification to drill in uk as material, also referredto far alarms/trips& closuretimes.,, DNV issueda certificate of lnterim Class on the same day rr, so

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2001WL1476198 (Cite as: 2001WL f 476198) OfficialTranscript OfficiatTranscript

the same outstanding matter as

ABS'

The^letterstatedthat the anticipated 12 November.on rg November' had replied to Rowan s retter of had-ail9o to meet which failure Amoco (Robert Johnston) obligation"^;t;;ilo readyfor october *", tt'"t the unit would not be arrival date of not later than i5 "-.ii:-i"-"ntal assertion ";r"i"o,ir*;i"J*"G"*r on the same terms' if at all'' This underminedthe value ofthe agr"emeilTh""il;; substantially into the Again' and we *oota ,roi i*" "rt"r"a "gr""*"* tr* Jo"r'-rttrs and evidence' mobilisation until mid-November with the contract #;;i;Jot RGV as a not co_nsistent ** made of any defect in the p*r, ,ri;;;; was, as BAO submitred, and I agree, n"r*s i"t sutir," and the 1ct despitethe 13 November retter justi! termination or renegotratlon' ."uion to a floating rate equal mechanism"for the RGV' namely term of 23 November was to offer..an alternativenricins con*actbeingextended to a fixed Rowan,sresponseon ,"bj#;iJ;,h" atthe.d"ilffiJ;.i;, 9 December of crude '"quited bvletter rate' to 13,500barrerspe. aay of Brent to tt'" conttact Amoco

;ift;ilt u"ra, p". o"v* ll2.?6^11l:,91 i3,500 3 years. to achieve a resolution'

a meeting "at a semor level"

..nothing was made of the stateof the rig,' in that to in the opening submissiorrsj,,:':::**', made in this correspondence As it was put on behalf of Amoco particurarn. t"r".*"" at all was ..negotiations,, ro" N""a*u"r and early Dicember. In as Rowan's letter of 12 in right" r1"^1^e the J;a;;;;;;1'so and was said * u" ,rr, it was'relying rssS toiermination(A)Amoco the pinion failures. ^io*t "ure case *t ti"- ncv arrived it n"o"ri"*.-p"""riu". November had said would be the "r, BAO OnsDecemberAmoco(MrGillis)wrotetoBAo(MrMarcom):

advise when the rig will be It would be helpfur if you could Amoco's ,.As you are aware, Amoco is finarising plans for Rotterdam. our intention will be to ensurethat io, uou.oinr. up.""u.*ait* Manual Acceptance Svstems from the dry haur carrier urro i, -uiruii" v Drilling off_roaded th; il;;;t?rr" pi'riiie';;;;;;";

i'tn" pri*u.*y^u,outlined requirements,

have been met."

l l E aod'lz2)' In fact' as Mr llcDonald the ADc interim report (paragraphs. to the Manual was a referenceto work.whilsi the rig was in Rotterdam' The reference itself had been planning * ""*""Jrriilantial suppliesthere' described, for some weeks Amoco Jung"a to roadequipmentand *oit ut.*#;;; contractorto o" rt i.i"r-rr* not in fact boardthe Amoco employeda Duich n"n*a"ti- IndeedAmoco did " for Arbroath at once,, "*i;;ii; There was no prospectof the RGV leaving G .ig until over 2 daysafter it anived' the next day in Rotterdamand Amoco thal the-19 *"' t1p^":t:1-t."^ -"I1"" to Arbroath at first available BAO sent a fax to Amoco advising the rig on 14 December effort should f,e made to move uaai'Jiiutr:"1".y p"""*u".. BAo sent; further fax ro Amoco at l8'30 to be ava'able for boarding at 20.00 r s.oo on tuesday-ti i. nott.ljui-, Also jacked in theharbour' onl5 up weatherwindow,,. The rig did arrive "i rorr' otrrouo"a rt "'r."un1;;iil;;* on Friday lg DecemberAmoco Amoco advising 5 of the-Contract"riirlr'.:Ji*i;;;;;;ft;; ofth" -oliiirution fee under sp*ai* fee "due upon delivery "' to RorDecemberAmoco paidthe rrrst half r""o'd #i;;";obilisation ecember' on 20 D. boardedthe RGV, BA;;;;;;;;Jin" and ADC personnel to be "fully operational" uy iz'oo Amoco that the RGV was op""i"a (paragraph 57) andadvised on *hith Amoco relies for its terdam,, documentsand events *u, to prorrJi" U"^"p,rr"f"l"- f*'itt"'" paid' on 2l DecemberRowan This, as Mr Marcom accepted, 16 O"""*i".. The invoice was not prace on of the RGV r" r*,*r "most have been closed out but one or submissionthat..delivery,, i*ing tt noyug".'eoc noted that and to report to which had been handed over the cARs " r'd;"it *r" on the rig-was onry to observe "o-pt"l"a The ADC team were :fi#ffiil;d '"*on was to avoid doing Th" two not acceptabre,,. u""n inrt*"tlJio rruy u, arm'i length' it e changeof anitude was noticed Amoco through Mr Sleighthol.". A-o"o,"-ti'u.ii"t "iro i,ua u*r.prringty conrract th;;" "o*riln"*"a. anyrhing which could be usedto suggest oi..-a.ked uPonbY Rowan/BAO' "conditions of which recordedthat all the outstanding .r 19 DecemberMr de euelerij oiDNV signed a DN\. survey Report

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Page24

outstandingconditions Class,,had been testedand inspectedand found to be satisfactoryand so had been deleted. One ofthe (RC022) was "Function Test Koomey Unit". they had held conversation on 22 DecemberMr van Rootenof ABS wrote to Mr wesselingh (Rowan) confirming a telephone that morning: ..thatthe undersignedhas contacted attendingDNV surveyor and that in lieu of attendance a surveyorin this instancewe of the the Koomey Unit is operableand able to operatethe BOP when same is will accept a statementfrom Rowan confirminfthat satisfactorilytested accordingto the applicable API standard' to Pleaseforward your statement the local DNV and ABS offrce". may not havebeenunrelatedto the approachof Christmasandthe departureof the certifiersfrom the rig' whilst this concession it also reflects the undoubtedconfidencein Rowan which ABS and DNV had. of The circumstancesin which BAO came to inform ABS and DNV that the condition was satisfiedhave been the subject it was suggested(albeit not pleaded)that BAo had deliberately deceivedboth ABS and DIrIV by criticism by Amoco. Indeed The assertingto them on 24 Decemberthaithe accumulatorunit had beentestedto the API standardwhen they knew it had not. (seeparagraph397 and following) but there later are detailsofthe testsand extentofany failure to meet the standards addressed yet and can be no doubt that in some,albeit limited, respectsthe statedAPI timings were not achievedby 24 December ABS control unit had satisfactorilytested and acceptedas much. DNV were informed on 24 Decemberthat the . On 24 December BAO (Mr McDonald) wrote to Amoco (Mr Gillis, copy to Mr Johnston)"for the sakeof good order ' ' to V have been fully satisfied as of 18.30 hours December24 1998 GMT, confirm that all certification requirementsfor Gorilla which shall be the commencemint date for chargesunder the Drilling Contract". The letter addedthat the RGV was "standing by awaiting further instructionsfrom Amoco". BAO's caseis that this constituteddelivery of the RGV under Clause2.1 of the iontract *d tttut (despitethe wording) chargestherefore commenced24 hows later under Clause2.2. on Amoco's (Mr Gillis) response 26 Decemberwas : ..Amoco is of the opinion thatthe rig is not 'fit for purpose', principally demonstrated the almost completelack of drill floor by * u result ofthe above,your personnelhave not had a proper opportunityto operatethe equipmentfunctionality. Further, "nd equipment and are clearly unable to demonstratecompetencein the use of the said equipment. In addition our acceptance testing with regardto other items has not yet been completed. date The eventsof the past36 hours unambiguously support our view and as a result we do not acceptthat the commencement all its rights and remediesunder the drilling contract with for chargeshas oicurred. Furthermore Amoco expressly reserves

lBAol."
to The complaint by Amoco was thereforedirected to the drill floor equipment.That is the featurewhich Amoco now accepts the discussed situation with Mr McDonald and Mr McNeaseand Mr Gillis be at moit somethingof a makeweight.Mr Marcom on Tuesday29 December.The contextwas a 36 to 48 hour weatherwindow to move from Rotterdamforecastfor Thursday.Mr Marcom made a file note of his discussions.The note recordsthat he agreedwith Mr McNeaseto tell Mr Gillis that the rig was under contract now and "we would test whatever as long as they want while on payroll". Mr Gillis' position was that as far as Amoco was concemedthey would not be on contract until everythingwas working. Mr Marcom and Mr McNeaseagreedthey would try to satisfi Amoco on all the items Mr Gillis raised,"which hopefully wont take but2416 hours", and then have "a definitive answer as to weather (sic) they really mean to take the rig or not'. Mr (Rob) Johnstonthen called Mr Marcom and agreedthat the best BAO as in breach of contract. Mr Marcom noted that he and Mr lvlcNease told him that Amoco regarded course"is to continueto try to do everything possibleto show them that the rig is ready and by Monday we will know for sure if they intend to screw us". I unhesitatingly acceptthat this reflects RowanIBAO's approach.I should add that N'lr McDonald

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Page25 2001wL 1476198 ^(cite as: 2001wL 1476198) ;ial Otttc Transcript OffrcialTranscriPt

::ruT:I:trli:::?:\l"Tf"tli:q'!!lil:$r',"li''Ti*ffi !v 'i'r prulo'' asto the events ""i;;, *"re in disagrreement Gillis and *, HoJ andrvlr asit was' othersdid *. i;I::;,.,r, be seen r* ir*"*"i*"tiJnot

ffi#."rd',;:T:""*li,:",Ti:5XinHmil'HT"':',?:JT""'""ni'n"fn"vT::dthe the rig rate' og'"t to renegotiate Mr Gillis' tn

ric readvlo:-1Tffffifi1"3ltiii$,t:i"fiH that-the was retrer ro Gilris' stating replied Mr.. Mr on 30DecemberMarcom
(4 in rePlY January..tv equipment" not meeti

;;;sistent withrruj-pvc-'to pio.""a but aswilr

ii"o^q1":'"=-*;*tlr*uunlxrt{$Jiffithev ,Hii,Tftrllilild as ffii*';*lf **ill.[&":li:ffi:!il!i"il:ffH1tl*it"":n'tifr'","o",, *T."1:.,5ilJ.ntuing'*:: ""*pit.a

':?"::l,l t"1-tutu'"o*'' Grurs-anu;'il"";;;"iher.window". *J misplaced. *t otty others and atAmoco il"s'"i.n"o T:1:f:r"tHHt;illilil""Tto o"* Mr window That Johnston. Mr Gillis -lt,ii,r'", Robert
il#r"1fi"i.ir"ed

::;;.t';:"1*m{::il;';ftl"n;lna:;y;;l"*c:qm* 3l *ffi;rg;*;:91p6 'i" riii'"i"*u*l::::il,ffi::1ffffiff?i"^i-il;J"t ?:""*1"1d:':Jif*jf'L*ilL nt ^nr'**l' ru' describe

'"''"iino* Johnstonsini"#J$:l take may tt'"oppo't'u"ni'v l:::-'i:il,il[ ff#ffiffil:il"*; Steve s/olunuury.
il;;;t; s or the Tuesday weoneJf, asregards perceived in agreed "t'i0""""'Tilu''pl'iJin """text
intransigence' 1999the BP/ Amoco On Friday 1 January merger was finalised'

t, Hori"as t the and suggt "i't'"1't"*1'1;;l'l'#:*,'T:"'['1"'"" rig thiscorrespondence

:,;i"lft'i;'i#'*t} d;lTiE:ii:".:T:ilft 4i:i{lff $J;T.":H,:"rrT,?,8il",iry{i:{fi

or fr.oJn.Amo;::.H iv o'*i't"t'eassistance *", Jtanding.by if;s ;:;l*ilQHJrffi;i * it'"notice crause *o reeuired'bv operations.. ild'"i'[l *'* ":*:: uv owen i"r' 1l':Tff"T;H:]*:lillli'"n t' "l# upon 1i"1" Richard pp
nonerdam of the after.derivery Dri*ine !nl1-ll co[fjnce 24hours stra* contract ::

!','1'l';;:il;ffi*;il:tfr[*'-:l;'1""'J;iililT*:l':y:i:*'f:?*r'li*;'i: as equipped setoutrn n *quit*gli",nc.v:;;9iiutll contract

'r,.t,i"'1":1ff$,'..il:t]ffi:"*'."r.:i1.,'"'; ."Ji::;;" to"ution,,*1i."""*, on a number co-m*"n...,"*,11n"'i'*ijjiiing without tt'" orwhen unit o.".*b:., "':":";;;;acceptablecondition' ""1n;a.11u
,:;" on commenced riit, 1??1.,.I;;";";;
cussions between our

::ffi -*:r*';u:#ina$r"****1lf#*tl.'5q;*litjr*T
to o" *,irr"i.Ji, rn"." equipment. i#.-r, *main
Contract: the requirements of the rig floor equiPmentincluding: - toP drive - PiPeracking system - iron roughneck - driller'sconsole control equiPmentincluding: :11 respective teams

**"*"re u"#.in" u"it will benr ,"roru"o

with comply otherw'ise and

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Works Claim to Orig' Gor4'

2001wL1476198 (Cite as: 200f WL f476198) Official Transcript OffrcialTranscript

Page26

- hydraulic control equipment - choke manifold and associated piping -BOP For these reasons, no day rate is payable in respect of the Rowan Gorilla V for the period from l6th December, 1998. Moreover, no charges will be payable until the Drilling Unit is operational.Having regard to the history of delays in constructing and commissioning the Rowan Gorilla V to date, we have no confidence in it being fully operational in the near future. Thesedelays have already resultedin an overall delay of at least 3 months.Under Clause28.1(b), we are entitledto terminate the Contract in the event of equipmentbreakdownwhich resultsin you being unableto perform your obligationsfor a period of 30 days or more. ln our view, there has been such equipment breakdown (for the reasonsset out above) since the Contract commencedon l6th December.We thereforeput you on notice that, if such equipmentbreakdownpersists,and the rig remains unfit for purpose for a further 7 days,we will be entitled to terminate the Contract under Clause 28.1(b) (as well as Clause

23.r.r).
We understand that you are continuing to work on the rig with a view to overcomingthe problems.However, all your previous estimatesas to when this would be achievedhave proved over-optimistic. In the meantime,if advantageis to be taken of the next available weather window, the rig will have to commencetow from Rotterdamwithin the next24 hours or so. As the next weather window might not be for another4 weeks or more, we will consentto your securing tow vesselsand line (as agreed betweenus) and commencing the tow to Arbroath as you have requestedin your fax of 5th January.However, such consent insofar as it is necessary(if at all) is given strictly without prejudice to our rights to claim damagesand, if appropriate,to terminate the Contract if the rig is not operationalby the end of Friday, l5th January,1999." The letter was copied to Mr McNease and to Enterpriseand Amerada Hess. There are a number of significant points about this letter: i) It assertsthat the contract commencedon 16 December,that is when the RGV arrived in Rotterdam.Until it was had written, Amoco's often statedposition had been that the contract had not commencedat all. Indeed all Amoco personnel beenexpresslyinstructedto do nothing while the RGV was in Rotterdamwhich could be usedby BAO to supporta casethat the rig was on contract, and those on the rig continued to believe that was Amoco's stanceup to and including 19 January.The same applied to ADC personnel,exemplified by their'terms of reference" preparedby Mr Sleightholme and issuedon l7 December(paragraph 146). ii) It refers to the right to terminate under Clause 28.1.b) in the event of equipmentbreakdown for 30 days. 30 days from 16 of on Decemberwould expire on Friday 15 January.The right was expressed be dependent the commencement the contract. to of Despite Amoco's presentsubmissionsthat commencement the contractis not a predicatefor the operationof Clause28.1.b) in my judgment (Paragraph90 ) it is and the letter was right to assumeas much. iii) The "notice" that if the alleged equipment breakdown continued for a further 7 days after 8 JanuaryAmoco would be entitled to terminate the contract "under Clause28. 1.b) (as well as Clause23.1.l) would also expire on Friday I 5 January. iv) The consequence the commencementof the contract would have beenthat chargeswere due from l7 Decemberbut the of the letter asserts that no day rate is payable because RGV is not fit for its purposeand doesnot comply with the contract. v) The defectsare statedin very generalterms. There is an issueas to whetherthe letter identified the defectsin sufficient detail to constitutenotice under Clause23.1.1. On any basis the defects,so far as relevantto the mattersstill pursuedby Amoco, were limited to the PRS and the well control equipment. The source may well have beenthe report of Mr O'Brien and Mr Slater (Paragraph179). Safety is not mentioned. vi) It acknowledgesthat BAO was continuing to work to overcome"the problems". BP Amoco was being told at the time that the rig would be ready by mid-January (Paragraphs179-180). The predicateof the letter however appearsto be that this w'as the immaterialtc the operationof Clauses 23.1.I and28.1(d)andthat Amoco was entitledto terminate contractif the problems were not solved within the final 7 days of the 30 day period. The claim was to a right to terminate after 7 daysif the rig was not then fully operational.That is not what the Clausesprovide: paragraphs and 84. 78 to vii) The tow to Arbroath was consented "without prejudice". However on 7 JanuaryMr Hosi.r on instructionsfrom Mr C'illis

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Page27

move. BAO did so and confirmed as much the next moming had orally authorised BAO to select and fix towboats for the no qualifications or reservationsexpressedin these earlier exacknowledgedby Amoco. Mr Hosie agreedthat there were (paragraph153)' a For Rowan/BAo the consentto tow was understandably key factor changes. overnight on 9ll0 January' Early on 11 Januaryit The RGV was de-mannedfor the move and left Rotterdam for Arbroath at a standbyl,ocation Halley North, about60 miles from becameclearthat the weatherwas deterioratingand the rig was taken to the Arbroath platform. permitting, the intention had beenfor the rig to go alongside There is someconflict in the evidenceasto whetheror not, weather that at-mosi it was inlendedto go to a stand-off location 750 the platform and jack up there. Some of the witnessessuggested 150 metresaway where the tow would in any metresfrom the platform. others that it might have gonetittre stand-offlocation to the_platform.The operationalsignificanceofany-location event have had to stop in order to preparefor the fi"nalapproach would then apply. The generalsignificanceis within 500 metr es of the platform is that the combined bp"r"tiont Safety Case In any event, I am quite satisfied that the that the intention puts in context the complaints Amoco makes about the RGV. weather permitting, the intention of all those documentsand the more reliable oral evidenceoverwhelmingly establishthat, jack up the RGV there. The 8 Januaryletter itself involved both for BAo and Amoco was indeed to go to the platform and ..commencingthe tow to Ar'broath".ihe destinationnotified in Amoco's Rig Move Notices and Daily (paragraph156) refers to ..1heArbroath platform". That is what the tow boats were chartered for' The Arbroath platform logs say the Time Reports is the towmaster,CaptainBroertjesand same.E-mails sent on 9 Januaryby Mr Hosie are to the sameeffect, so is the evidenceof to the platform were all-on board' the warranty surveyor, Captain pique. The relevantpersonneland equipmentfor the approach platform and to shut down the platform for that to preparationswere made for the work required to interface the rig ind ttre when the RGV left Rotterdam on 9 occur. Moreover Captain Mallett and Captain May agree that the intended destination Januarywas the Arbroath Platform. at Halley North a tooth on the At about 01.57 on l2 Januarywhen the RGV was jacking the legs down at the standbylocation jacking stopped.pafts off*o teeth on the pinion were cut out andjacking resumedafter some l/4 pitch pinion F7 crackedand 8 hours. This failure has loomed large in Amoco's caseaboutthe jacking system. Amoco (Mr Gillis) -BP On 13 JanuaryAmoco and ADC personnelretumed to the RGV jacked up at Halley North. On 14 January Amoco "is very concemedover the re-occulrenceof such the pinion failure statingthat wrote to BAO (Mr Marcom) about failwes". The letter continued: .Note that, despite repeatedrequests,we have not been provided with any explanation as to,the likely causesof the failures the causeofsuch the whilst at Sabinepass.The failure on Januaryl2th underscores criticality and importanceofunderstanding failures. As you areno doubt aware,failure whilst jacking adjacentto the Arbroath platform could leadto a major incident. Accordingly, the the we must understand root causesof th; failu;s (and the engineeringsolutions)suchthat we can systematicallyevaluate platform'" with jacking up adjacentto the Arbroath risks commensurate pass' There is a dispute as to whether "repeatedrequests"had been made for an explanationofthe pinion failures in Sabine to concemedwith the termination ofthe contractis attached this judgement as Appendix B' For correspondence The subsequent be summarisedas followsevents,can presentpurposesit, and the more material contemporaneous 15 Amoco made further criticisms about the condition of the rig in a letter signed on behalf of Mr Denholm dated Friday letter, was copied to Enterpriseand Amerada .lanuary.This letter was sent at 17.35by fax that evening. It, like the 8 January which is Hess. The letter statedthat the rig was "some weeks away from being operationaleven if no new problems emerge whetherto terminatethe contract wamed that Amoco would be consideringwith the co-venturers itself unlikely in our view". It in the next few days.Mr Marcom said, and I accept,that he only receivedthe faxed letter on Monday l8 Januaryas he was out

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of the office on 15 and 16 January. the accumulator unit had failed and In relation to the well control equipment the l5 January letter stated that two regulators on testedand added"in particular, the problemswith the BoP neededto be replaced,the equipmlnt remainedto be satisfactorily will need to be strippeddown continue and we remain of the view that, as previously advisedby cameron, the whole system by contaminatedhydraulic fluid before it canbe commissioned".The pipe racking systemwas and inspectedfor damagecaused ..fully operational". Referencewas a[o made to "a recurrenceof the unexplainedpinion failures at SabinePass said not to be from the pinion failure as during jacking opeiations in the North Seaon l2th January" and to "questionsto be resolvedarising leastbeforethe causeof the pinion failure is known". Yet to whether it would be safeto jack-up the rig alongsidea platform at days regardless the letter assertedthat there *1, un immediite right to terminate which was to be decided upon in the next few the issuesor questionsto which it referred' of any attemptto resolve also copiedto Sir On 15 January,Mr Palmer,the Chairman of Rowan wrote to Mr Fuller, a Co-Chairmanof BP Amoco a letter the Chairman of Enterpriseand Mr Laidlaw the Chairman of AmeradaHess referring to "the enclosedletter Graham Hearne his from Amoco,'. It is uncertainbut the referenceis likely to have beento the 8 Januaryletter. Mr Palmer expressed displeasure ..personalassurance"that "notwithstanding a few minor glitches" the RGV was "fully capableof drilling and provided his operations,'.The letter referredto the needto "adjudicate" the dispute properly but ifnecessaryto resolving the matterthrough litigation. to At a meeting held on Monday l8 JanuaryAmoco decidedto terminatethe contract.At that time BAO had not responded the (or the 8 Januaryletter). But Mr Marcom did so by two faxed letterstimed at 19.41(pinion failure) and more recentcomplaints 23.23(other matters)on I 8 January.The letter about pinions speaksfor itself. The thrust was that the failures in SabinePasshad of been attributed to various causesas previously advised to representatives Amoco, an explanation (binding of the brake It plates) was offered for the recentF7 failure and a remedyto prevent re-occurrence. was also statedthat the pinions had been ^futty and will be consideredfurther in the context of the alleiestea and cenified. The letter has been the subject of criticism 36610367).ItwasbasedonconversationsMrMarcomhadhadthatdaywithMr gationsaboutthejackingsystem(paragraphs and Mr Rimlinger. Quinn that, subjectto the possibility that some shakedownor fine tuning the The secondletter addressed allegeddefectsand asserted required,the rig was "entirely outfitted, fit for its intendedpurpose,fully certified and preparedto perform Amoco's might be Aritting opeiations when presentedwith the opportumf'. The letter also referred to "Amoco's intent to createa breach of contract scenariowhere such breach had clearly not occurred" and the "economic reasons"driving Amoco's correspondence. The letter concludedby proposing a meeting to be attendedby Mr McNeasein the [.]-Kon 28 January.As regardsthe specific matterswhich remain in issue,the letter statedthat: "1. The regulators on the BOP accumulator unit have been replaced and the unit is working. A function test of the unit has been witnessedby Amoco appointedpersonnel.2. The BOP has been pressuretestedand is fully certified.
A

The pipe racking systemis fully operational.

It is Amoco's plcaded casethat this letter aonstituted a refusal by BAO "to strip down or inspect the BOP system so as to addressproperly the defects and contamination in the BOP system" and that it thereforeamountedto a refusal to rectifu the is defect within the meaningof Clauses23.1.1 and 28.1.d) entitling Amoco to terminatethe contract-This submission ad(paragraph 491). aboutthe well control system later in the contextofthe allegations dressed

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Tuesday 19 January'The letter described Amoco (Mr Garforth-Bles pp Mr Clutterbuck) sentthe termination letter at 17.14on ..thetop drive cannot achieveeither the speedor torque ... specifiedin Appendix I to the contract" which a new problem that 18 Januarydid not affect Amoco's was .,so serious,,as alone to make the rig "unfrt to drill-. It was said tha-tBAo's letters of ..in summary,'sao huo ..persiitently failed" to meet its obligations andthat the rig was "still not operationalor even view that under both Clause 28.1.b) (repeatingthat the commissioned',.The right to terminate "withimmediate effect" was asserted and on the basisthat Amoco was "entitled to acceptthe contract asrepudiated"'No contract had commencei on t6 December) of the trial. Apart from a in referencewas made to Clause 23.l -l.Amoco's caseabout the top drive was abandoned the course view as to "whether the rig could be referenceto not having enoughinformation about the pinion failures to form a considered as a reason orjustification for safely jacked up next to the-Arbroath platform" tothing was said about safety considerations rectifr the BOP systemor anything else. termination norto the effect that BAO had refusedto reply that a separate By letter dated 20 JanuaryAmoco replied in detail to BAO's second 18 Januaryletter. The letter stated that BAO's pinions (albeit in the event no suchletter was ever sent)but repeated about the failed wbuld be sent to the first l,etter would havebeensafeto letter..did not provide sufficient information to enableus to make an informed decisionasto whether it jack up the rig next to the Arbroath platform". In contrastto the letter of I 5 January(Paragraph166) this letter acknowledged 'the BoP remainsto be strippeddown trrattrrl Bop accumulatorunit was now working (savefor someflowmeters) and stated: A more comat least for partial inspection in order to ascertainwhether any damagehas beencausedby fluid contamination. initial results". The letter as a whole is targetedat clause 28 not repudiatory plete inspectionmay b" ,r"""rrury dependentupon Nor, again,is It doesnot evensuggestthat the well control systemis still contaminated. breachand not serioussaf"ty "on"e-r. refirsedto rectii/ the BOP systemor anything else' it consistentwith a belief that BAO had Amoco had issuedthe Writ in theseproceedingson the previous day. It was in fact issuedshortly before the terminationletter was sent. The major relief sought was a Decliration that BAO had repudiatedthe contract and that Amoco was entitled to the acceptthe repudiation and to terminate the contract under Clause 28. Also, but later on 19 January,following receipt of Amoco and a number of related companiesclaiming termination litter, Rowan and BAo issuedproceedingsin Texas against and damagesfor breach ofcontract and tortious interferencewith contractual and businessrelations.There followed various with Clause3 1.l of the contract, jurisdiction battles.It is only relevantto this judgment to recordthat, in accordance protra-cted all contractualissuesareto be resolved in theseproceedingsbut certain other claims involving otherpartiesareto be tried in the is Texan courts. The consequence that in the TJxan proceedingsa number ofdepositions have been given by personswho also were thereforedeployedduring the courseof and gave evidencein thesepr-oceedings the contentsofsome ofthose depositions the evidence.(B)Amocoand Co-Venturen BAO submits that it is important to see the decision by Amoco to terminatethe contract in the context of Amoco's and the co-venturers documentary records leading to the decision. I agree. I shall therefore summarisehere what I think to be tlre substance the matterscontainedin that evidenceand the oral evidencerelating to them. of On 1 Decemberthe co-venturersheld an "Opcom" meeting. Enterprisesought"ideally" a reducedrate for the RGV and only a two-well (not five) Arbroath programme; Amerada Hess wanted to call offthe whole project. It was recognisedthat "delay" was not a justifiable basis for terminating the contract if only becauseany right to do so had been waived. The questionwas it ofthe rig could be refusedbecause was not "fit for purpose".Mr Gillis (who was present)recorded raisedwhether acceptance in his diary that there was a "need to (on the basis ofthe contract)find things that arenot fit for purpose".He also notedthat the of financial consequenaes the delay in delivery were, in my word (with which he agreed),"peanuts"' Enterprise(Mr Reilly) wrote to Amoco (Mr Garforth-Bles) on 4 December.The letter was critical of Amoco for not instructing Mr Gillis to ensurethere was no relaxation in enforcementof the contract.It continued: to tacli from co-operation looking "We aiso considerthat now the Rowan Gorilla V is on the high seasAmoco shouldchange part and exploiting that mercilessly. for any failure on BAO's

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allowancefor BAo explain in detail the implications of making-reasonable we proposethat you sit down with Mark Gillis and position and in finding the failure that givesthe u"ttt in protectirrithe the failures so that he fully understands role he *.,rr-pr"y lever required. any BAo failure ' ' '" people on the caseto assistin finding and exploiting Tim smith agreedto put two of your best contracts drilling units based to group appeared have "a siglificant oversupplyof the Bp had identirredby early Decemberthat the combined to "addiessthe RGV problem" and addressing seeking"urg"nrly" By g DecemberBp wa-s on anticipatedcapexreductions,,. a subsidyof th{Rg}/ tnd to subletthe rig would likely require ..options", noting that there was no intemal ."qui**"t' for programme concluded that Bp would "likely" cancelthe Arbroath had about $100,000 a day. By 29 Decemb". tvt oe;otm altogethergiven an option to cancel the RGV contract' Infill Project 1 January1999)to act directly.inrelation to the Arbroath when Bp heritagepeoplewere in a position (on and after gp p"opi" 1inparticularMr Denholm) were providedwith priority. Th" 'Ro*"n" girr"r, and the RGV the matter was plainly..current "onrid"iuile for neg:ti1tio1t *iat about the RGV. The "problems" with strategy a detailed insight into Amoco,s expenditureup to spud of the first well' The authorised were also tabled. Enterprise*a n-Jiuaa Hess had only co_venturers proceid with t]re infill project would achievea *"." ,u"'h that in ,h" t;;r :r/l9 adecision"not to current project Enterprise ""orro*i", flow effect of $l gm alainst a loss of net income of $2.7m' capital expendituresaving of $25m, and u posil# cash monthsperiod of unusedrig time itnfi p."g'""t*e of3 not 5 wellslAs it was' a 3 a and AmeradaHesshad suggested shortened to original agreement a 5 would r""gtit"tittt"t p-eriod.It was also statedthat Enterprise' was likely and a shortenedprogramme .lhe at Arbroath"' other options for useof the RGV rt u["oo*r, *ell not being drilled on well programmehad been cond-itional limited (none were ever suggested)' were'beilevedto be Mr to.visit the RGV in Rotterdam,Mr o'Brien and Mr slater' Mr Denholm arrangedfor two very experiencedBp rig auditors on the rig. Mr o'Brien and Mr Slater reportedback to opinion Denholm said he wanted an independent(from amocJ; seco.td to on the "awfward" position createdby Amoco's need first by a visit note dated 4January.The note t:-Tq Mr Denholm attitude (not acting"in a to also^had take") and criticiies Rowan's avoid acting as if the rig were..on contract',('ju-porition we view of the condition ofthe rig: team mannir") but alsJgives an overall havethe major equipmentinterface'if ..From our visit, discussions with individuals and direct requestof views with ADc, who later in this note doesnot causea problem' additionat work suggested nothing seriousgoeswrong during further testing or if the January"' by the middle of -.r, opinion is thlatthe ri! ittoutdi" ready to leave Rouerdam experiencedwith the Koomey (BoP) control unit and a list of The note also containeda referenceto additional problemsbeing power now featuresin the trial (the alleged lack of a separate 13 items brought to Bp Amoco,s attention onty on" of which for left the rig on 5 Januarythat it would take another 2 weeks he supply to the Bop). [t was also Mr cowie,s ,riew when testing' ing to be complete including crew training and system acceptance "lr"rytt rvhat becamethe 8 Januaryletter (Paragraph156)' Mr Denholm By 7 Januaryit is recordedthat the co-venturershad agreedto Mr sghraleD and Mr Mogford were a'lsoin the picture at this time' was dealing with the matter but his immediat" ,r.rp".ioi1M1 Yet at this time and for some ..Mr s;f"fy" uni hi, involvement attributid to that role. Mogford was describedin evidence as played any part in BP Amoco's considerain the docurnentsthat safety considerations days thereafterthere is no suggestion tions. risks of the The note flagged the business Denholm'srequeston g January,Dr Feil produceda Bp Amoco briefing note at Mr and that "current Amoco estimates"indicated that some of G wells looked uneconomii project, that Enterprisehad suggested for exposure 151 1007o might potentiallybe completedin2l4 days"resultingin BP Amoco eventhe 5 well prograrnme that new estimate exposureof 95 days' The a 270 days,lear,'ing 100o/o days',.The estimatewhen the RGV was contractedwas some gaveevidence the risk to BP Amoco, eventhough Mr Routh of AmeradaHess was plainly seenwithin Bp Amoco as increasing just the cost of a 5 rvell programme'The reduced not of his belief that the co-venrurerswere commili"d to a 9 month rig cost

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job or that a winter startwas RGV was not thought to be able to do the time estimatealso doesnot lie well with a casethat the for the project which stated Mr Gillis had circulateidAmoco's p.ogru,'*" ar of any consequence utt- trra""a on 24 December time estimatewas' as the Ld last approximately TVzmonrhs'and reduced commencei., n*""*i". that drilling wu, of the RGV' "*p""r"dro Ms Turton ( Amoco) said, primarily due to the capabilities to contain a recomsupplyinSMr-Dlholm with a draft of a document By the evening of l2 JanuaryMr Steve Johnstonwas RGV' The document referred to the tn" eru.-outtt Infill Project and !h9 mendation to a then unspecified decision *ur.", uuout hazardoussituation", and (the verplace that day; describing1t a1 creating a "potentially pinion fairure (which nJa o"ly iur.* (i'e' after credit for the for disseirination to cJ-venturers; set out the net sion for Bp Amoco intemal use but not the ;i;; 5 well programme was the RGV for Bp Amoco according to whether the co_venturers,shares)financial exposure for the cost of the basisthat 100% izo doy, *u, $ri.zm and for 2f7 days$37'6m' on or basedon a270 day 2r7 dayperiod.rn" "*por-ur" ro. ihe end of the one year term of the programmewas completedand until of the cost was for the accountof Bp Amoco oncethe BAO contract. of the estimatedreducedamount that he had never informed the co-venturers Mr Denholm acknowledgedin cross-examination o f t i m e r e q u i r e d f o r t h e i n f i l l p r o g r a m m " e , o p o u t o r s ' o f t h e f i e l d B P A m o c o w documentswhichl lato b l i g e d t o g i v eit' Mr e r e c o n t r a c t u a y least contained t h e they were supplied with co-venturersthat information and whilst on the evidence to the co-venturershe had deceivedthem' acknowledgedthat in r"iii.gi" gi* ttris informaiiln Denholm nonetheless with the target of finalising it by "close documentwas the subjectof further w91k 3nd amendment The draft recommendation Mr Mr. Denholm informed Mr Mogford' Mr Schraderand of play" on Thursday 14 January. tn tt " -o-in-g-or i: l**ty the "earliest next weather that of deterioratingweatherconditions.and Horton that the RGV was at the standbyto"ution uZ""use than this"' He added: is Monday/Tuesdaynextieek, but may well be later window to commencemovementto Arbroath all ableto advise ..Forward plan. we needto get ourselves(and partners)in a position.by Friday close of play where we are able to delay this decisionfor a condititns peisist we may be Rowan of rermination of contract if appropriata ii;;"1*""tier to know what our plan is by midnight Friday'" few days but worst caseis we need RGV on 16 period under Clause 28.1.b) (assuming"delivery" of the The 7 day period in the g January letter and the 30 day weatherconditions was of coursethat in 158)..Therelevanceof the December)both expired on Friday tS fanuarylp;*t;it final approachof the RGV to the Arbroath date could be extended"untiithe conditions permitted the practical terms this end of 15 not to permit the RGV to goto the platform' The relevance would have to be taken whether or platform when a decisi,on was nil' iunuury in terms of the abilities ofthe RGV let alone safety is of available" were set out, analysedfor risk and costed'It In the courseof the further work on the document the "options documentsdescribethe pinion failure in Amoco's case,that these some significance,grantedthe importan"" "r"iu"a to the ..lo*,' *h*."as options to buy out the contract or to stack the rig were describedas potential for the termination option as ..good,,.There were no options available for intemal utilisation or sub-let' Mr Denholm, with detailedfiguresto supportit, that "in terms By the aftemoonof 15 JanuaryMr SteveJohnstonwas informing terminatingthe ;as to go alead with the programme,worse indeed than of 1999 numbers,'the worst option for Bp ;;;; that would inevitably give rise' Termination and failure contract and failing in the claims by Rowan to which it was anticipated ,the worst,, caseonly.,ruil'r-y"t"". of coursethe question is notjust one of numbers.It also involves other in such a claim was for capital expenditurebut there is no doubt that BP Amoco levels of retum availablefrom other projects *niJ -"y compete were concernedto reducecapital expenditurein 1999' and the co-venturers They reported back to Mr Denholm (copied to Mr Gillis' Mr Mr o,Brien an,l Mr slater returned to the RGV on 13 January. critical of ihe "functionality" of the PRS (a complaint not noiv -Bop Hosie and Mr price) on Saturday 16 January.The note was of not being fully operational,and to a desireto seethe results "due ol wri"r" pursued as such),referred to the "o.t heard *a, "insufftcient clearances")and concluded: "ilr process,,on the pinion failure (conjecture

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fall ..without the resultsof a suitableintegratedtest process rest of our presentfindings would, under BP's proeesses' under the 'omissions Profile' into our standard being incorporaied categoriesthat we would plan to risk manageat start up, these are document. at were addressed a meeting '. ' held yesterday' " Any safety The Bp Amoco concemsabout safety that you and I discussed issuesraisedhave been left to Rowan to manageand decidetime frames" to the BoP all of which were shown either as The ..omissions profile,' referred to contained a number of items relating power supply to the (including the supposedneed for a separate completed on l7 Januaryor to be completed..prior to Spud" goP). The pinion failures were referred to under Ref. No. 2.3 as follows: "2.3 a similar cause-[LeTourneau]are still to investigate There have beenthree failures ofthe jacking systemto date two being of and report, findings urgently required. Completion by: Prior to going over platform." ..prior to going over platform" meant prig to cantilevering out the drill floor of the RGV over the As Mr O,Brien made clear puts the expressionof concernin context' It was not platform not prior to jacking up the RGV adjacentto the platform. That jack up there. The contrastwith the termination letter and 20 seen by Mr O,Brien u., u ."iron not to go to the platform and report are ofno relevance l7l and 172)isuppur"nt. The safetyconcemsreferredto inthe 16 January Januaryletter (paragraphs to the issues. until ruesday 19 Januaryand the meetingto In the event the plannedmove of the RGV to Arbroath was delayed by weather to reach a conclusion on 15 Januarywas consider termination was set for Monday lg January.To that extent the urgency weekend and on the Monday morning' The l5 January alleviated and the final documentationcontinuedto bL refined over the taken at the contractwas, as Amoco accepts, letter (paragraphs165 and 166)was sent in that context.The decisionto terminate letter was only sent the next day. The meeting was attendedby Mr a meeting on Monday lg January,albeit the termination heritagewas present' Mogford, Mr Denholm, Mr Schrader,Mr Horton and Mr Wood. No one of Amoco Gillis). The report is, I think, sigrrificant' on l g and 20 January,Mr O'Brien reportedfurther to Mr Denholm (also copiedto Mr legal stateofthe RGV at the time oftermination which was preparedwithout an eye on It gives a Bp Amoco critical view of the commentsabout anything that to make or contractual niceties. As a rig auditor Mr o'Brien also said that he was expected taken on 18 January' omitting related to safety. The decision-to terminate the contract, unknown to Mr o'Brien, had been passages ofno or no continuing relevance,the reportsstated: 19 th January: being prior to the.coming Today I expectto leave on the helicopter being broug;htin to de-man the rig. De-manning platform . Allan (Slater) left yesterdayand should weather window, that looks as if it will allow the rig 6 u" to*"a to the Mark Jones,the OIM onboardfor the debrief you today beforeretuming home. I will passthe completion of any further notesto integrated operationsover Arbroath . The situation as of this moming at 1000 hrs, following a walk around is: of the proposed The rig has not yet been offered to the onboard BP Amoco drilling personnel for commencement been createdand offered for process of Drilling SystemsOperational AcceptanceTests. A draft document re the tests has at intemal discussion 1030hrs.

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' is presentlybeing addressed ' " The Top Drive is not fully functional - this is seenas a RossHill problem and arrivea, brrt came without a critical manifold, this is now being The Varco pRS 3 pipe racking system's purt, foi "o-pt"tion Training on this equipment was ongoing but has chased down as to whether it is on it,s way or was inaivertently not ordered. competent,othersare struggling indicatedthat some individuals areleaming but are not yet operationally stopped,discussions and causing commentsof concernfrom the Varco specialists' equipmentand a flow measurement The BOp control systemis hydraulically operationil, problemsnow exist with elecfonic . I do not know if this problem is a knock on affect of the suitable Cameron electrical service engineer t as b"en requested was in Sabine' problems causedby the non-cleaning/picklingof the control hydraulics whilst the rig hoping that this is possibletoday The Diverter system is presentlynot made up , nor in a stateto flow through or test, y" T: problems with the trip tank pump' -several days later than originally planned. During the walk round there were control that it has a clean bill ofhealth' no i'rll nu.,,r" answerre the review on thejacking systemand cannot categorically state ..omission F.ofiI"", thouglr it should not start in eamest until the integratedacceptance Allan and I continued to update the testing processcommences. especially as rig floor training is going so slowly ' Rowan There still have to be concernsre safety, training and competence, severalissues,he complainedto severalof the BP Amoco people, have brought on board a consultant,nab Mornei to handle etc and was advisedto deal with including myself re lack of accessto individuais, equipmentproblems (cranes especially) as management, he said he was using a 30 Brian euinn the Rig Manager.Rab gave a talk at yesteriuy', ,ui"ty meeting re waste what was a day's course. minute talk to replace 20 th January: testsfor the unit.asan acceptance At the time of leaving I had at last held my meetingwith Rowan re the concentrated 48 in a concentrated hours integrateddrilling rig. Although the document showsaround72 hours, I believe that it could be done view basedon if therewas no *"nt *"tt. In resiect of when the rig would be truly fit to put forward for testing,my if ev-erything would be possible' tow, platform hook up etc. is that 5 to 7 days ritJota seethe rig at a point where successfulcontinuoustests askedon their view of times neitherthe Rowan manager' This form of test is an unknown quantity to the Rowan guys so when OIM or engineerreplied conclusivelyif complacency Being on the rig itsill when there wtsso little urgencyto complete,was for me very strange. ... I do not know it's original weatherwindow delayshad crept in urlt the rig *as not reactinglike a rig that was severalmonthsbehind becauseof start date . us,though Allan and I drew up a draft of what we term an "omission Profile", in this casebasedon what we were seeingaround tesrs.By using the information we had to hand we were able (to) normally this is drawn up during the integratedacceptance format used.The build a demonstrationof th" simple electronic tracking system and time based risk managementdecisions ultimately this was intention being that the guys on tire rig who had not seenour processwould be able to relate much easier. them to suddenlydeviatefrom tasksin t-h" not handedto Rowan u5, on. problem we brought up (bulk tank safetyvalves) caused this reaction of "taking the eye offthe main ball of hand and changedirection to immediately addreis our concerns.We see job in hand so we withheld the on making the rig function", often in ourjob. To us it was critical that Rowan concentrated the ..oP," for BP Amoco drilling reps use after the tow. (The emphases mine). are I would comment: there was a i) plainly Mr O,Brien believed, as he said, that the RGV was about to go to the Arbroath platform because that this was inappropriate was on board for that reason.There is no hint of a suggestion weather window available.Mark Jones let alone unsafe. ii) The Top Drive is no longer any part of Amoco's case' l;i) amoco no longer relies on any problems with the PRS after 7 lanuary (seeParagraph496). equipmentis iv) The BOp control system is siia to be "hydraulically operational"; the problem with the flow measurement referenceto any sort of strip down of even part of the system' agfeed not to be a seriousmatter. There is no ,rj tn" Diverter would not be required until drilling was to commencewhen it would be tested.

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that it has a cleanbill of health"' Mr vi) All Mr o'Brien noted aboutthe jacking systemwas that he could not "categorically state this must I think be read as a very limited o'Brien is meticulous and is not, I think, a man given to categoric statemenis,and expressionofdoubt especiallyin view ofthe "Omissions Profile" (Paragraphs190 and l9l) vi1 1.ne concerns expressedabout safety were directed at matters related to the drill floor. continuoustests would be the viii) Mr O,Brien,sview at the time thai 5 to 7 days should see- ri-g at a point where succe_ssful it followed' could he recall possiblewas one of which Mr Denholm said he could not recall whether or not he was aware'Nor' Mr o'Brien at their giving the information to any of Mr Mogford, Mr schrader or Mr Hayward. Mr Quinn and Mr Gray had told pass them' ;eetiilg that they were happy to do the tests and confident the rig would price) arrived back on the RGV at 13.30 hours on 19 Januarybelieving that Mr euance (who alternated3 week shifts with Mr then and there.He said it the rig was to be mobilised to the platform the next day but discoveredit was actually being mobilised ..very much a surprise" io him when he wai told the contract was to be terminated. Mr Price left Mr Quance some ,u*J", .,handovernotes,,.The notes contain nothing of any relevanceto the issuesand are significant for that reason.As Mr Quance disarmingly put it no one told him it was unsafefor him to be on the RGV' (ATN) and Against this backgroundthe final documentaryrecord, dated 19 January, called an Authorisation to Negotiate ,.privileged" was preparedfor the sigratures of Mr Mogford, Mr Schrader,and Mr Hayward. They were all BP Heriheaded his behalf' It: tage. The signatureswere-obiainedin the courseof 19 January,Mr Mogford authorisingDr Feil to sign on i) sought approvalto serve notice to terminatethe contract; for full ii) referred to ihe detay in delivery and statedthat at no point since the RGV arrived in Rotterdamhad it been ready ..equipmentproblemsassotiatedwith the well control system,rig floor equipmentand, latterly, testing by Amoco; acceptance the rigjacking system,have causedcontinuouscausefor concem"; and options, noted that the DTI had informally indicated it would be comfortablewith a decision not to drill the iii) aJdressed-the programme at the current time, stated that the view was that "reputation risks" could be managed,and recorded that the costs". co-venturershad agreedto pursuetermination and'1o meet their shareofall associated documentto be signed" and it was intendedto establishproper authorisation Mr Denholm said the ATN was "an after-the-event justification for termination. But the documentwas carefully drafted- [t served for the decision to terminate not to set out the little purpose if it was inaccurateor incomplete. It did addresstechnical matters but did so emphasisingdelay and concems ,"gurdl.rg ..fitness for purpose". Safety hardly gets a mention let alone in the strident terms which were advancedduring the trial. The authorsmust have got their information from somewhere' It is Amoco's submissionthat the pinion failure on 12 January and the alleged failures of the well control system after the flushing,transformed the situation into a crisis" and from then on "Amoco's main concemwas safetyand thal was the basison which the contract was terminated". The documentslend no support to that thesis. Indeed the opposite.Mr O'Brien's reports speakfor themselvesalbeit he was on the rig at Mr Denholm'srequestto give his views on the stateof the RGV. I regretto say that whilst both Mr Mogford and Mr Denholm maintainedthat the decision by Amoco to terminate was made on groundsof to safety and loss of confidencein BAO neither was ableto sustainthat in evidence.Termination was expressed be basedon the rig not being operationaland delay. Whilst Amoco submits that the evidenceof the co-venturers"confirmed that safety was Amoco's driving concernin the decision to terminate" I also do not think that is so. The thrust of Mr Routh's(Amerada Hess) evidence in his witness statementwas that what he was told was that the rig was "still not operable" and Amoco did not consider the rig to be "fit for purpose". Moreover Mr Routh was not responsiblefor the decision at Amerada Hess to support termination nor did he even discussthe matter with thosewho were who apparentlymadethe decisionon Friday 15 Januaryon team meetingon 18 the basisof a brief which hasproperly not been disclosed.Mr Craig @nterprise)reportedto a management Januarythe minutes of which statethat termination was being considered"as the rig was late and suffering from a number of defects". Mr Craig'sown information was derived from othersin Enterpriseas he had no direct contactwith anyoneat Amoco. to The minutes are consistentwith the rerms of the ATN. \l"trilst both Mr Routh and Mr Craig rnadereferences safety in their are more reliable. Amoco's letters dated 8, 15, 18 and 19 Januaryrvere each copied to oral evidence I think the documents Enterprise and AmeradaHess and I have already commentedon their terms: seeparagraphs156 to l5E; I65 to 166; l7l; md 172.

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interim report (paragraph After 1g JanuaryADC (Ml. Sleightholme and Mel rhomson) prepareda final version of the ADC the CARs. This final version was 122).Tl.reydid so by going thro-ughthe interim report, daily reports made thereafter, and -19th January 1999"- The issue date is redescribed as ..Final RevisiJn - showing status1of nGV) at North sea Location approvedby Mr Hay' It is an important when it was subsequently corded as ..February1999" which, on thJevidence, represents as o'ADC's final report"' It was written in the knowledge that and substantial document and will be referred to again in context rig as seen through the Amoco had terminated the contract. Mr Sleightho'ime described it as a good record of the state of the no cledit' The testing as at l9 January.Mr (MeltThomson's evidenceseekingto downplay its significancedid him acceptance ..Key points,, were summarised.There were five of them. Only one is of any relevance."Outstanding works" included the testing workto be done,particularly in the areaof BoP testing,the statementthat..a major concem is the amount of acceptance the major condrill floor equipment ...." Referencewas also made io the CARs under "Other Issues": "CARS cover some of CARs since arrival at Rotterdamandthere arenow l2 out of 58 progresshasbeenmade in progressing cerns listed above.Good 'not done' cARs relatesto a matter complained of still in the .not done, *tegoi. copies are attached....';rn facionly I of the rightly dein these proceedings,natiety No 56 described as "BoP operating Chamber contamination". No 56 is also and ..late cAR" albeit no exact date for its issueis given. Neither the Key Points nor the cARs make any referenceto the scribed as about either the jacking or well control systems:see paragraphs294 and Jacking System.No safety concemswere expressed Events 447 to 450.Subsequent and that the On January26 (Appendix B) BAO wrote stating that it would treatthe contract as continuing in full force and effect would shortly be arriving at a standbylocation at Dundee.The RGV arrived alongside reasons, RGV, for iafety ani operational to a wharf at Dundee harbour on 26 January and whilsi it was there BAO continued to carry out various works upon it and mattersto supportits caseon fitness investigatethe l2 Januaryand earlier pinion failures. Amoco relies on the recordsof these for purposeand repudiation. places some A detailed responseto Amoco's letten of 19 and 20 Januarywas sent by BAO on 19 February.Amoco also be BAO's "intransigence"in the face of serious considerablereliance on this letter as a further manifestationof what is said to as andjustified complaints about the RGV and as evidencinga failure to recognisethose complaints.That is addressed regards paragraph491. The letter is also included in Appendix B. In summary: the well control systemin i) The purposeof the letter (which ran to 15 pages)as it statedand its terms exemplifu, was to respondto the "contractual and technical points" raised in Amoco's letters; that: ii) It included statements ..In the moming of 19 Januaryrepresentatives Amoco attendedon board the rig and requested extensivetest to demonan of op".uUility of the ri!. Although such a test was not required by the Agreement BAO agreedto perform such a test"; strate the and that ..the alleged breakdownsare, on proper analysis,without substance.In any event it is absurd to suggestthat BAO jeopardise a would not, and did not, seekto addresseach and every concem Amoco raised.To do otherwisewould potentially yearsconstmctinga rig at a cost in excessof $200m,transportingit to the North contract under which BAO had spent over 2 Sea and arranging for it to operatefor a period of at least 12 months.To assertfurther that BAO repudiatedthe Agreement in these circumstancesis a nonsense." iii) It addressed and refutedthe allegationsabout the BOP including statingthat: "The BOP and BOP accumulatorsystemwere there is no In thoroughly (and satisfactorily) flushed before your purportedtermination of the agreement. thosecircumstances this. This on representative boardrecommended norhas the manufacturer's ."u.orribl";rrstification for strlpping down the'gOP by as, testing and is unnecessary indeed,was acknowledged Amoco's ADC any reaionable acceptance requirement is beyond representativeon board the rig'. limitations of the PRS had no impact on the performanceof the rig, and that BAO's personnelwere iv) It statedthat the access properly trained, qualified and competent and had been and were in the processofdeveloping increasedproficiency in new equipment; the v) It asserted regardingthe pinion failures that "our letter of l8 January1999clearly establishes likery root causeofeach incident and would allow a reasonablepersonto make an informed judgmenf'; and could not none ofthe issuesyou have raisedhas any substance vi) It concludedby stating that "as this letter demonstrates,

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your actions in purporting to terminate the agreementare themselves a properly form the basis for any notice of te-rmination. as subsisting for a further sevendays " ' in r" to t clear repudiation of the agreement.we shall how"r"i .ontin "utihJ"ontJd the contract' In such event we would expect we standready to resume the event that Amoco wishesto reconsiderthe position under the agreement ' ' ' '" outstanding amounts due p"y-"ti "f "ll memo for owrers" which included as a condition (Recommendati-ons) In March DNV issueda documententitled..conditions did not fo#*a"O on completion of investigation"' That to be dealt with by 20 May "Resolution of Urot"n]u"tlng OiT"rt:,"-I" iaxed Mr powdy chasingup a number of "outstanding :o r,rty DNV affect the validity ortne RCV interim class cert#cut". 5o to confirm to DNV Houston in writing that was this condition with its "Status" recorded as "LeToumeau survey items". One i*estigations with casting manufacturer revealed & that original theory re overloading was catrseof q91* ni"i"ns "'U'"q'''"t't he had already received from PSC dated 9 July u ,opy of a-letter no manufacturing defect,,.Mr Dowdy ,"nt or.w-iiourion DNv then agreed to delete the confirming trrJ trr" failures were due to severe overload' (paragraphs 303 to 30a) and wrote condition. and BAO's solicitors that day it left on the start of a journey to canada The RGV remained at Dundee ufiir zzoctober. on only repudiation of ihe.contract. rn the event, the RGV to be Amoco,s wrote stating that BAo now acceptedwhat was said performedwell and 2000. rne euiaeice is undisputedth$ the RGV has startedwork offshore Nova Scotiacanadu on 29 March the trial began' A Infill project rrad not been carried out at the time without significant problems in canada. The erbioath by mid-February' year (2001) but had not commenced considerably revised programmewas planned foJit 2001 and endedon 4 october that th9 {i{ beganon Mon day22 January', No chronology would be completewithout recording Summer in witing, over thi coune.of^thelast 2 weeks of the after 85 days in court. The Closing s.rU*irsioor-*"i"frovided in presented 3 substantiallever-archvolumes' submissions'nAds *"te term. Amoco,s ran to 361 pagesand 199 pug"s of reply and to provide someexcusefor the proceedings as a complaint but moreio i.rdicatethe natureof the That is not intendedto read Further, some seriousallegationshave needto resort to cross-references. inordinate len$h of this judgment, and the fr_equent I to have addressed' not affect the outcome,those concemedare entitled been made againstlrroiuiouul,,which, "rr"r, if tfr"! Jo there was a casein which I think it I think appropriui" t.i"r. If ever have nonethelessat leastsoughtto be selectiveund *h"r" adducedthis is that case'TheEvialr the sJmissions made lei atott* all the evidence neither sensible nor practicario address dence it appropriateto does not.fit,neatly into compartmentsbut I think The evidence both documentaryand oral unsurprisingly must now tum and my judgment upon them may be to which I expresssome generalviews upon it so that,h" ;;i#irsues seenin that context. In many insupportive of BAo's case on all the major issues' is First, the documentaryevid,ence almost without exception for it in the to be it would be natural to expect to find support stancesin which if Amoco,s case was as it was advanced on thejacking system' g*u*pr"t r ttave alreadytouched upon arethe pinion failures documentsthere is no supportto be found. further investigation' jack .rp ,rr" ncv alongsideihe atutoath platform at least without Amoco,s case is that it was unsafeto the one which occurredon 12 January yet the earlier failures in Septemberwere not iit" tro:""t of iny pressingenquirles;,and and the eviADc mad" #unr what it says' Further the documents was not consideredsignificant by ADC if the irnal rJport to the Arbroath the RGV *ut U"i"g p'"putgi for its final approach dence of those on the RGV demonstratethat on 19 January wittr aiparent disregardfor what is now put forward as were eoncerned platform so far asboth BAO and Amoco,s rig personnel also of the trydrautic systemactivatingthe BoP which are a major safety issue.sin,ilu.ry the complainlJJ.rt ".","*iration in the documentsat least after the system was ao not find much real supjort said to involve potential major safety "on""-, the contract was terminated' flushed as it was before with the most and.the co-venturerswere determinedto come up Second. the evidence is really overwhelming that Amoco under the contract or risk losing the expectedfirst the rates persuasivecasethey ,outJ to put BAo on thJspot ofrenegotiating a policy of looking.for any failure on BAO's part and the massiveinvestmentby Rowan in the nGV' lt was indeJ return from where with such a pressin! objectivethere is.a risk you will find them exploiting it mercilessly.But if you searchfor failures In my judgment the evidence exist to an edent .iiti"i.t it unjustified. they do not in fact exist or exaggeratethose that do

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demonstrates both those characteristics, as does the bare fact that the allegations themselves have undergone considerable changeand in the caseofthe drill floor been substantiallyabandonedduring the courseofthe trial. Third, and with only limited exceptions,all the witnessesto the events who gave evidence on behalf of Amoco had a torrid That wis a reflection of the difficulty they had in sustainingAnoco's casein the face of the untime in cross-examination. BAO also submittedthat there were some surprisingomissionsin the choice and statusof the facts and the documents. doubted witnessesto give evidence.There is some force in that criticism, albeit a large number of witnessesdid give evidence,and covered all the salient issues.In particular, I regret to record that I found much of the evidence of Mr Gillis and Mr Hosie inconsistentand unsatisfactoryas well as the evidenceof Mr Fleming, Mr Thomsonand Mr Sheenof ADC. The evidenceof Mr Mogford and Mr Denholm was also unimpressiveparticularly in seekingto maintain a casewhich was frequently demonstrated In to be in conflict with the documents. contrastI should recordthat with only very limited exceptions,I found BAO's witnesses compelling, straightforward,and impressive.Indeed the quality, in particular of the Rowan, LeTourneauand BAO personnel, who gave evidencewas remarkable.They had an obvious and attractivepride in what they did and ajustified confidencein their ability to do it bom ofexperience. Mr Mogford and Mr Denholm gaveevidencethat the decisionto terminatethe contractwas basedonly on safetyfactors andnot of economic factors. As stated(paragraph 198) I cannot acceptthat evidence.It is belied by the documentsand the sequence to termination.Even the ATN (paragraphsl96to 197)makeslittle mention of "safety" and both Mr Mogford eventswhich led and Mr Denholm were wholly unconvincing in their attemptsto explain it away. The stratery was to rely on Clause 28 and that demonsfrates Insofar as the failed F7 pinion was a matter of concem the correspondence delay not safety considerations. thosefrom Amoco , BP and the termination strategywas well under way before the pinion failed on 12 Januaryand remarkably ADC on board the RGV who believed up to and on 19 Januarythat it was aboutto go to Arbroath were hardly askedfor their views. Both Mr Mogford and Mr Denholm also sought to make a casethat BAO's "attifude" was one of "intransigence" in word, was in relying ifthat is an appropriate relation to the condition ofthe RGV. Again I reject that totally. The intransigence, on the contract and refusing to reducethe rate of hire when BAO saw no reasonto do so. The evidenceis all one way that BAO was making every effort to solve such problems as there were. Amoco and ADC were on board and well able to judge that for from or renegotiatethe themselves.BAO was not so naive as not to appreciatethat Amoco was looking for groundsto escape acknowledgesBAO's efforts to get things right. The point madewas more that the fact that contract. tndeedthe correspondence BAO was moving heavenand earthto do so meant the problemswere seriousand would take time to resolvenot that they were being ignored. Mr Quigley, who left the RGV for the last time on 9 January,readily acceptedthat the people on the rig were doing their very best diligently to get the rig into the best possiblestate.Mr Quanceand many otherswho had direct experience of work on the rig had nothing but praise for the qualrty of Rowan personnel. upon theoreticalrisks, complains Fourth there was a very marked disparity between Amoco's casewhich was concentrated who worked on and who would in fact have been operatingthe and supposedor possible concernsand the evidence ofthose RGV. They were the last peopleto treat safety issueswith anything other than total respect,their concemfor the safetyof those for whom they were answerable well as themselveswas utterly genuineand thorough, but seeingthe complaintsin the light as oftheir realistic and on occasiondisbelieving responsewas an eye openerto the real world of rigs andthe qualitiesof thosewho but work on them. Anything can go wrong in the senseof possibility and on rigs can have catastrophicconsequences there is dangersare greatdoesnot meanor requirethat the exercise still a needto keep one'sfeet at leastnear the deck. The fact that the ofjudgment about risk by intelligent, experiencedand well-qualified people is precluded.In the acceptedlanguageand principles of the industry the requiremenlis to reduce risk "as low as reasonablypracticable" (ALARP). That setsan appropriately that risk cannot be eliminated anymorethan human elror or mechanicalfailure. stringent standardbut also recognises Fifth, the expert evidence.Whilst I do not question the expertiseand professionalismof the expertscalled on behalf of Amoco nor that in general eachofthem was properly seekingto assistthe court in resolving the issuesto which their expertiserelated, I do think much ofthe expertevidenceexhibited the samecontrastas much ofthe factual evidencebetweentheory and reality. Further in many instancesit became or in my judgrnent is apparentthat the reports were built on mistaken factual premises.Contractual Issues I Although to a considerableextent my conclusions on questionsofconstruction have alreadybeenexpressed, proposeboth to

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certain ancillary or related mattersoffact in the context ofthe summarisethem here and, so far as can be done, also to address only ut" -y conclusions important to the,issuesthemdocuments and chronology to which I have also alreadyreferred. Nol secoitn" ncv which are consideredin subsequent th" selvesbut also to uooress-l"ng uu.iou, allegationsabout the condition tions of this judgment. of the RGV from the united Statesto Rotclause 2.1 didnot impose any obligation on BAO as to the time for mobilisation terdam. to Amoco at Rotterdam:clauses 2'l and2'2'ln 24 The contract and charges..commenced" hours after "delivery" ofthe RGV 24 hours after BAo made the RGV availableto Amoco at Rotterdam my judgment, as a matter of construction,that occurred 26 f* in" iurpoies of performing the contractualseryices:Paragraphs to 33. 24, 1998 (paragraph15i)' I reject As a matter of fact, I think delivery in that senseoccurred at 18.30 hours on December one way that neither BAo nor Amoco conAmoco,s casethat delivery in fact occurred prior to that date. The evidenceis all 24. whilst Amoco has soughtto distinsideredthat the contracthad comrnenceduntil BAO wrote the letter dated December when in my judgment sustainable guish commencementof the contractfrom an obligation to pay chargesthe distinction is not the ttt" motive may have beennot to pay charges tactic was plainly Clause2 provides that both dependon "delivery" JrA *nitrf Indeed until 24 Decemberthat was a shared Beo to say that the contract had comrnenced. to do nothing which could "nubt" given that those who did board the rig at Rotunderstandingof Amoco and BAo. In Amoco's caseexpressinstructions were rig was on contract' BAO's position (Mr terdam should not act in any way which could give rise to an argument that the of ABS and DNV prior to drilling and that this Marcom) was that there was further work to be dine to meet the requirements challengedon this widelcg' Indeed work was to be completedbefore the rig was delivered to Amoco. Mr Marcom was not it. No more did any witness from Amoco even suggestthat it had been there was no basis on which Amoco could challenge understoodby Amoco that the rig had been delivered before Decembet 24"delivery" was a unilateralmatterfor BAo to bejudged Mr Barnessubmittedthat the partiesintentions were irrelevant because on which intentions. Whether that submissionbe right or wrong the correspondence objectively and not fi,om unexpressed availableto Amoco for the the RGV Amoco relies (paragruprs i++io 146) cannot in my judgmenl be read as BAo making context in which it was sent' Amoco's purposeof performing the contractual sewices, no. rito"ta it be read out of the factual that delivery of it but ratherto ensure letter of Decemberg was clearthat the purposeof Amoco boardingthe rig was not to take it went on contrict. That was in effect no more than an extensionof it was, as Mr Cowie put it, 100 per cent ready before rig. Mr Marcom did say in the fax of 14 Amoco,s activities at Sabinepasswhere Amoco and ADC had also been on board the weatheropportunity but not only Decemberthat every effort should be made to move the rig to Arbroath at the first available and when Amoco boardedit, it was was that sent prior to arrival of the rig in Rotterdambut, before, on and after its arrival, Noreference was made to charges'I seeno known that the rig would in fact remain in harbour for sometime (paragraph145). to what both patti"t consideredand intendedat the time, and how they not basistherefore in the correspondence to give effect and the contracthad not commenced' conductedthemselves,nu*ity that the RGV had not beendelivered in the relevantsense after the contract has comclause 2s.l.b) can only apply in circumstanceswhere at least 30 consecutivedays have elapsed judgment' lggg that condition had not been met and for that reasonalone, in my 19 January menced under Clause i.i.'lt 89 Paragraphs and 90' : see Amoco cannot rely on Clause23"l.b) as providing a contractualright to terminatethe contract (at least) on the Amoco's casethat it was entitled to terminate the contract pursuantto Clauses23-1.1.and 28.1.d) depends to rectifu the fault or a failure to establishmentboth of (i) a proper notice and (ii) a refusal oi fuil.t " by BAo to take action The only item in that letter now relied commenceto do so. The'onfy "notice" relied upon is the 8 Januarylettei (Paragraph156). control equipmentincluding hydraulic control equipment " ' to upon as notified by it is expressed be "deficiencies" in "well BAO was "continuing to work BOp,,. This letter, far from assertingthat BAO had failed to respondto date or at all, statedthat problems". That is the antithesisof a refusalto take actionto rectifu the fault required on the rig with a view tc overcoming the and28.1'd)' 23.1.1. by both Clauses

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to how or The letter was wholly unspecific as to the "deficiencies". Nor did it refer to or stateany requirementsof Amoco as if at all Amoco was dissatisfiedwith the stepsBAo was taking what stepsshould be iatenio remedytlem. Nor did it statehow that BAO to ..overiome the problems". Indeed insofar as "problemJ' or "deficiencies" were referred to it was expresslysaid with a view to overcoming th"-. That was unqualified, save for an expressionof doubt as to when not was working on them whether they might be overcome.No doubt conscious of that, Amoco has alleged that BAO was in fact aware of the defito ciencies and that in its responseon 18 January@aragraph169 ) demonstratedas much. But that (even if righO only serves As so far as known to BAO had been or were being addressed. in add emphasisto the statement that letter that any deficiencies ..thewhole point ofthe letter" was that "it shouldbe actedupon" and I would addthat suchwas alsothe Amoco itself submitted point of the provision for notice itself. Amoco's caseis that BAO (i) refusedto strip down or inspectthe BOP system and (ii) did not proceeddiligently to Amoco's satisfactionto remedythe weil control system.As to the first (i) the allegationis, I think, hopelessas a basisfor the operationof the clause. The 8 January"notice" doesnot begin to satisfi the requirement that it "specifu in detail" the defect and it makes no referenceat all to stripping down or inspectingthe system.As will be seenthe evidenceis again sufficiently clear' BAO conAmoco did not requestone let alone require one prior to 19 January.The nearestAmoco sidered a strip down unnecessary. letter of 15 January;but the contractwas terminated within days of that and it cannotbe relied upon as a cameto it was in the notice under the Clause.Further BAO did continue to work on the well control systemby flushing it and replacingthe control fluid. Far from refusing to remedythe problem BAO was doing what it consideredwould cure it. If Amoco wantedmore in my judgment the clauserequiredit to say so. Personnelof the relevantcontractors(Cameron)were on boardthe rig throughout-Mr Maicom said (without challenge)and I unhesitatingly acceptthat BAO did not refuseto do anything for Amoco' He also said and I acceptthat whateverBAO's views as to the needto do so, if Amoco had insistedon a strip down of the BOP BAO would have stripped it down. Mr Quigley and Mr Cowie readily and rightly acknowledgedthat "Rowan" was doing everythingposAmoco did not want sible to get the rig fully operational.It is of courseof some ironic significancein this contextthat because Nfr Gillis said, was deliberatelyavoiding to do anything to support BAO's contention that the rig was on contract Amoco, as giving instructionsto BAO as to work to be done on the rig. That was so throughout the period up to terminationon l9 January. To characterise, Amoco's submissionssoughtto do, BAO's letter of 18 Januaryand failure to agreeto Amoco's 15 January as letter (itself emasculated the 20 Januaryletter: paragraph172) as a "refusal" by BAO to remedythe matter complainedof is by in my judgment closeto absurd. The reality was that Amoco had taken the commercial need to terminate the contract up to (and beyond)the wire which was represented a suitableweatherwindow to take the RGV alongsidethe Arbroath platform. The nicetiesof Clause28 and in by makesclear; and insofar asthey did it particular Clause23.1.1. did not enter into the matter as a reading of the correspondence than getting the rig ready to go to work. Amoco appearsto have could not be assertedthat BAO was doing anything other thought it was entitled to impose a sevenday deadline by which the RGV must be operational,failing which it was entitled to Role of ADC terminatethe contract.But that is not what either Clause23.l.l . or Clause28.Lb) provides.The or I do not think it necessary helpful to analysethe role of ADC in terms of agencyor estoppelor Clause6. L5. There is no real issuethat ADC was responsiblefor closing out the CARs and did so or should be taken as doing so with Amoco's knowledge. Mr Cowie, who introducedADC to Rowan in SabinePassin September1998, in effect acceptedthat whilst ADC would sign off on the CARs Amoco would be aware ADC was doing so and would have sanctionedit. Mr Hay and Mr Sleightholme then Anoco acceptedthat Rowan would have understoodthat if ADC witnessedtests and did not ask for them to be repeated could be taken to have been satisfied. That was how Mr Perkins and Mr Snow saw ADC's role also. The real importanceof ADC's evidenceand documentslies in the extent to which they support or otherwise the parties'factual and expert cases.The Jacking SystemDescription The system usesmultiple drive trains housedin a structureattachedto the hull of the rig. The output from eachdrive train is a 'climbing' %pitch pinion which mesheswith the leg rack, making a rack and pinion systemfor vertical movement.It is these% pitch pinions and the four failures (paragraphs120 and 16l) which are at the heart ofthe issuesconcerningthejacking system. The RGV has a total of 72 climbing pinions with eachpinion having a rated normal elerating capacityof 1000Kips (equivalent to lm pounds). Each pinion has 7 teeth. Each elevating unit comprises8 drive trains or gear units anangedin 4 opposedpairs with one elevating unit on each ofthe 3 chords of eachleg, making atotal of 24 units on eachof the 3 legs. The distancetip to

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tip ofthe teeth is 3 feet. Each tooth is about 10 inchesthick at the root and 9 inches at the tip. of The Unit is a 3402.2: I ratio speedreducing unit (i.e. it reducesthe motor revolutions fiom very fast to very slow) consisting gearbox. Holding power in the static an Electric Drive Motor, the motor pinion, the No 6 Primary gearbox and a Secondary condition is achievedby spring-set,Ll*"tro--ugnetically- releasedmulti-faced disc brakes attachedto the motors.The brakes are .'on" so long * .ro po*". is applied to releasethem. The holding capaclty of the brakes is at least some 3200 Kips and possibly -o.". Th" motor pinion ii-attachedto each motor and protrudesinto the No 6 gearbox which is also attachedto the motor. It mesheswith and drives the first reduction gear in the gearbox. The output pinion from the No 6 gearbox mesheswith and drives..the red gear" which is a large diameter gear. The hub of the red gear is connected('splined") to the shaft of a % pitch pinion which Jrives anotherlarge diameter geir, the bull gear. The bull gear is splined to the shaft of the larger Y<pitch pinion, the teeth of which climb up the rack. pitch climbing pinion. The The normal elevating capacityrating of 1000 Kips was basedon load application directly onthe Y+ to provide design parametersfor all operating conditions. The minimum designtemsystem as a whole had six load ratings peraturewas -20 C. The ratings were: i) normal lifting capacity 925 l{tps per pinion; ii) preload lifting capacity 1200Kips per pinion; iii) preload lowering capacity 1300 Kips per pinion; iv) normal holding capaeity1300Kips per pinion; v) preload holding capacity 1800 Kips per pinion; vi) severestorm holdin-ecapacity 1800 Kips per pinion "Preloading" is the addition of water into tanks in the hull of the rig in order to simulate the maximum loading of the leg footings (or spud cans) on the seabed.It is used in effect to establisha firm footing on the seabedto supportthe rig's elevated weight and resist severestorm reactions.The water ballast simulatesthe increasedvertical load in such conditions.The North Seahas a hard seabed and typically the spud canswill penetratelessthan 5 metresinto the seabedduring the preloadoperation. The RGV also has StormLOKs, a system of chocks and wedgeswhich engagethe leg rack when the rig is in an elevatedposition. StormLOKs take a proportion of storm induced loads to ensurethat the pinions do not become overloadedin severe storm conditions. The design parametersfor the RGV were significantly in excessof the 50 year storm condition required for operationsat the Arbroath field, meaningthat eventhe worst possiblestorm predictedto occur at Arbroath once in a 5A yearperiodcould readily be withstood by the rig if the design was in fact met. In December 1998 LeTourneau performed a site specific study of the Arbroath site forthe RGV (see paragraph37). The "critical check" was "leg chord usagefactor for a maximum survival storm". That is the estimatedworst 50 year storm at to Arbroath. The maximum pinion load with the StormLOKs in place (for a wave at a 90" headingto the leg) was calculated be 1327Kips. With the rig in what is called Operating Condition I it was 1842Kips. Operating or Drilling Condition I is intended to representthe maximum condition in which the rig can operatewithout the StormLOKs engaged. Of course if the rig was in Operating Condition I there could be expectedto be ample warning before a "maximum" storm at arrived to enablethe StormLOKs to be engaged.They can be engaged any time the rig is not jacking and take some3 hours to install. Subsequentevaluation by LeTourneau in January 1999 concluded that the figure of 1327 Kips was a slight over-estimationof the load and it was reducedlo 1289 Kips. Mr Mobbs said and I acceptthat both values were conservative: seealso paragraph310. It The principal reasonfor having multiple climbing pinions is redundancy. is not uncomlnon to haveone or moregearunits out of service during normal operations.ln the case of the RGV normal elevating capacity, assumingproper balanceof the hull

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even with weight between the three legs, would sti[ be obtained maintenance.

g of the 24 pinions on each leg out of servicefor repair or

is thatthe jacking system in facthad suffrcient dgfen.of]1".|:6,:*ors of A consequence the level of redundancyand tle fot"ittg itt" ju* to yield' On any view of the on;ut*tfUy trains, in effect to power to .Jack through,,jams in the.ge-ar becauseof the risk of "urry be contimplated save in an extreme emergency evidence that is a course tf u"tiot' which would ooi "lo"t' tune" from their written to submits that BAo's;itnesses "changed their damageto the rack, g"u,' urra *otors. whilst ^c.i;* little significance and to a limited extentI thinkihat is right, it is of oral evidenceon the practicarityand ease"r.i""ti"git*gh, where it would be envisaged could not poini-ade was that circumstances asthey readily recognisedth" iirk, of doing ,o. rf" (seeparagraph285)' be managedsuccessfully needto be consideredbut if they occurredit "iJpi"C"uly put into manufacture'It was at 750 Kips. It was tested in lggl but never The earrier desigrrfor the jacking systemwas rated rigs throughout the worrd. The resultsof on numerousLeTourneau itself a deveropmentof a 375 Kip systemusedsuccessfully DNV approvedthe gear the rating in rgg3 to 1000Kips. both ABS and .nr,*""*"niof the lggl tests and other work led to the testsas well as the normal which included a"ty cycre and uitimat" loading units. Testing was repeatedon the 1000 Kips units holding tests required bY ABS. testedto units. In November lgg6 each of the units was opposed.gear The testing was carried out on a test standut'ising two was loaded.The test was piniin. Thus eachtooth on both pinions l 950 Kips for one compreterevolution of a n piiii-ctimbing a maximum load of 2105 In fact during the test the units were subjectedto witnessedand approvedby both ABS and DNV. cracts' No crackswere found' This was particleinspection (MPI) for to Kips without faiiure anJ Jere the' subjected .ugrr.ti" was approximately 9 c' Dr Slater rn" t"*i'"rutur" 1 *tti,"1t ttte test was carried out the test required by eBi for certificati,on. July 1997 ABS apor rrrrayestrl'sequivalent figure-was l7l7 Kips' In calculatedthat the equivalent ar -6 c*u, rso' Kips. test (paragraph225)' of 1800 Kips (static) at -2AC on the basisof this proved the sysremfo, "upu"iti", carried out on the sametwo test stand units' The test cycle t":t. In April/May 1997 aleTourneau in-house 20 yeardury YT 20 years normal p", pinion to *hi"h it *"tra typically be subjectedduring sought to subject trr" uiit, to the amount "f r.ii levels of 1300Kips with peak pirioi. 185 complete revolutions at mian load service but in a concentratedmuch shortertime side of the root of several trre test MpI showed iurface cracks on the compression values of I 3gg Kips were observed.After The cracksto the teeth of the % pitch pinions were found to have cracks' teeth of both % pitchpinions. No other "o*po.r".tt, cyclesduring from the November load test and the multiple stress of a combinatio' oittr" stresses were thought to be the'resuli they supporteda to subjected the ultimate load test when subsequently the 20 year duty cycle test itself. The samepinions were load of t.g ti*Lt the severestorm holding capacity' 3218 Kips was load of 300oJ(ps to one tooth of eachpinion' A load of The ultimate load test was a static test which applied a itself' load risked failure of the test machinery in fact applied to each unit. Neither failed. Ani further of the Super development,shipyard liaison and regulatory approval Mr Dowdy was responsibleat LeToumeau for the design witness, plainly well g#"0 was a most impressive (it<"etris "b9r_r" vrr Gorilla series of which the RGV was the fi.st. rte ofthe gear units' based H" arud"a the specificationfor thecast steel components qualified by both education and experienc". The specification was providedto PSCfor aJ t".t rerult, enhancedto 1000Kips. on the original 750 Kips design parameters DNV in eatly 1996' The specificationin and after agreement*ith paa was approvedby both ABsand review and approval was (npt sc teit blocks) ofthe steelto be cast,albeit it is agreedand terms and as usual in the industry applied to tesi coupons they represent' components the samepropertiesasthe much larger known that the small couponswould not be expectedto have That was not really challengedand I for properrry ttri desigrrof the vopitch pinion was strength. Mr Dowdy said the governing accept it without hesitation. (ESP) This Specification,knor+'nas the Externai source Product The specification was originally dated 19 December 1995. to Specification, included statements the effect that:

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Round API 8C test Blocks representativeof i) Mechanical testing would be conducted on "separately cast Equivalent the cast part". atmosphericsourcetemperaturewas -20oC(-4'F)' ii) The dlesigrr ^ method ^-r ..-L^, :-^r,,,{- rA^o/^crrrfqcpin,--^rl^r and "shall include 1007osurface iii) Magrretic particle examination *ui to be carried out by the wet fluorescent were referredto as well asthe needto satisfuDNV and spectionof all toothed areasincluding endsofteeth." Specific standards ABS. after final machining and heat treatment' core iv) ..Mechanicalproperties: The following mechanicalproperties are required lateral expansion,elongatiorLand reduction ofarea requirements propertiesofyield strength,tensile strength,charpy "rr"rgy, API 8c Equivalent Round test blocks atYcbelow definedbelow are to be establishedby destructivei"tti"g iiru*ples cut from minimum unlessa range is provided"' the surface. . .. All testing shail conform to ASTM A370. An oul.r", specifiedare For the %pitchpinion the values of the core mechanicalproperties were:

is Kips per square The ESp specification went through a number of revisions but there were no changesto thesevalues. KSI by propertieswere to be established destructivetesting inch. The test couponsare cast at the sametime as the pinions. The core readingswith a minimum requiredvalue. The specification also required psc to take surfacehardness of the test "ouponi. tempering The ESp Specification provided for Magnetic Particle Inspection (MPI) of the pinions after the normalizing and in API 8c 6.4.6.2. That provided "only those indications with major diprocess.Acceptancecriteria were to be as indicated to with surfacerupture shall be consideredrelevant". MPI is designed mensionsgreaterthan l/16 inch (1.58mm) and associated is directed. detectsuJace breaking flaws and, as will be seen,it is surfaceflaws to which the thrust of Amoco's allegations yield strenglh and tensile strength are measurements the ability of a pinion to withstand load. Yield strengthis the force of ..plastic" deformation of the material, meaning deformationwhich remains permanentupon measuredin KSI that will initiate when the force removal of the force or load. The contrast is with "elastic" deformation which is deformationwhich disappears or load is removed. I 15 Tensile strengthis the force neededto break the material. The maximum specifiedfor the % pitch pinion test couponwas KSI. Hardness. Hardnessis a measureof the ability of a material to resist indentationand abrasionand so avoid wear. There is now Indeedthe evidenceis that the minimum value no allegationthat the pinions were defective becauseof poor surfacehardness. was achie.red.

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MinimumelongationandReductioninAreaaremeasuresorindicationsofductility. lacks in ductility will be more before it fractures. A material that ability of a material to deform plasticalry Ductility is the (higher loads) occur' imperfectioni where stressconcentrations sensitiveto the presenc".irfi""" which is required before fracture minimum elongation is the extension may elongatebefore fracture. A specified A material length' For the % pitch pinion the minimum "iirr ".ili"a occ*rs of a uniform sectionof a specimen"*pr.;;;;r';p"i"*rug" specified for the test coupon was 10' percentage of Area)' if it fractures.Area Reduction (or Reduction will also becomeslightly thinner before A material which is erongated of a uniform section of a area U"for" hacture o""uo of in" cross-sectional % pitch pinion test specified, i, tt e r"quire;ffi;;;"r"u* *"u. rn" specified minimum for the specimenexpressedas a percentageof the "ri;i;;;;.-rectional coupon was35o/o. strength and ductility' It deform without fracturing- It reratesto both as the abiiity of a material to absorb energy and Toughness is strength' Toughnessdecreases or indicated pr-***1tu 11111 of a material'sability to withstand uv assessed a"rt-"ti r" fracture t"rgh";;r;"ti"g can be with d-ecreases it. It, too, is a measure It strengthincreases. is also sensitiveto te,np"ru*"tJ brittle fracture' with a v-notch in the middle, supportedat both ,. charpy Energy,, refers to an impact test in which a specimenof a uniform size pendulum' The lowest quantlty ui trr" to*", end of a bar that can swing as a ends, is struck behind the notch by u ,t.it". mo,rrri"J is the charpy energy' charpy by absorbed the specimenbefore it fractures of of energy(measuredby the charpy impact na;i;; and toughness amaterial auctr.ritv z pitri piJ""J when the -"-"ott (-40"C;;il";" testing is carried out at low temperatures " "ttt % piich pinion test couponwas 15 ft lbs' for the is low. The specifiedminimum level of Charpi expansion"specifiedfor the laterally before it fractures.The minimum "lateral when a charpy sample is struck it wilt expand % pitch pinion test couponwas 0'010"' energyand lateral expansion of minimum elongation,areareduction,and charpy In generalterms,the higher the measurements .Itr"-"r* of any ca-sting to actlievethe right balanceof strength' hardnessand is the of a sample the more-,-1ructile,, sample. hard a material is the more brittle it is' The which it is to be subjected.The more strong and ductility for the particular usageto and yield are important .a"k u.,d pinion mating ,i.fu""t. Tensile strength % pitchpinion requireshardn;ss to limit *"u.-utit " rated capacity' The risk of ;;" normally rouJ"i lienificantly below their due to rhe applied loadings on the pinionr, uruii;;y and their low rotational speed' orit to"i.ion ofthe pinions impact loading i, n'rnmui -d so is the .irk "f ;;;i;-i"tiu"ft""*t" " a matter of dispute' itt'" i-pottu"Ie of ductility and toughnessis producing large pSC,s most commonly used altoys. pSC has years of experiencein The casting of the pinions was in one of a experienced castingfailure Neely s:rid,ano r u"."pt, ttrat rs!!r11wer castingsfor the oil industry using the ,u-" uttoy.-w and DNV. Mr Neely said it was a "fact of life" oy both Ails i, below desigrrload for any such parrs. The #d)' ""iin",a the casting and its test coupon as well as other to customerg ttrat hnai values wi' uu.y u",*""" (arbeit very hard to explain (save Mr Loflin)' I acceptit' Mr it evidence or utt it relevant witnesses identically treated coupons or castings.rnut ** " " is thepreferred methodof and of more value in determiningsuitability' Loflin was wrong. It is why dynamic testing oi*rG, of the speciw pitchpinions for the RGV in fact met the requirements It is important to nore that all the test "oupon, oitrt! D, slut". is that if they correlateto the test stand uy ficarion. The significance of the coupons ^'"-pi"i."a Yr.\":tiJd to have beenproved by dynamic testing' correlation to the tesrsi'aJpiniott *ttitit is-known couponsthey establisha and out very experienced and of the best standards thosewho carriedthem There is no disputethat pSC's Mpi procedureswere heattreatedand time afterthe castinghas been machining and a second skilled. psc Mpi the pinions twice. once prior to rough mir of At each stagethe casiing is sprayedwith a ind smoothiurfuce. preparedby shot blasting to produce " -or"-"t.*

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fluorescent magnetic particle inspection powder and water whilst an electrical curent is applied through the casting. An ultra violet light is shoneon the part to which the current hasjust been applied. The operatorthen examinesthe surfaceby eye to check for any indications or flaws which show up under the light. The operator has a gauge with indications of various sizes which also react to the light and can be comparedto any indications shown up on the casting. Mr Neely said that "with experience" an operator will know the approximatesize of a defect one-sixteenthof an inch long (1.58mm) ening on the conservativeside. Mr Neely describedthat as "the industry standard".Any such defectis marked. If it obviously needswelding, it is welded. Otherwise, after the secondMPI, the casting is machine-polishedand then ground or welded as required.At each Thus everypinion was stageit is inspectedby a qualified operator.Ifthe castingis welded the whole MPI procedureis repeated. that were welded three times. subjectedto MPI over the entire surfacetwice and any He Mr Costawas the MPI operatorat PSC for the pinions. He gave evidence.His skills and pride in his job were apparent. said assess indications of one-sixteenthof an inch or lessbut with his experience(he qualified for the he was trained to locate and of relevant level in l99l ) he said he could identi! indications of a length of one-thirty-second an inch (0.8mm).Amoco's Case of The allegationsmade in Paragraph4C(9) of the Claim and the essence Amoco's caseon the jacking Systemare as follows: "(a) On l2th January1999,there was a pinion failure on the starboardleg jacking system.There had beena history of earlier pinion failures, including three occnsionswhich were known at the time to the Plaintiff, while the drilling unit was being fitted out in the USA. Furthermore,two further pinions (E7 and E8) had beenchangedout or modified in October 1998,at least in five faulty brake headshad been found in October/ November I 991, eleven gearboxes the jacking system (El , E2, E4, E5, anda check in E7,DL,D2,D3,C7, A3 and Hl) had given problemsorhadto be removedor changed October/November199E, revealedleaks on 14 sealsand 5 bad bearingsand/or thrust plates.This ofthejacking system on or about 6 January1999 had to further failure on 12 January1999made it essential investigateand identify the causeof failure beforethe Drilling Unit could safely bejacked up at its intendedlocation adjacentto the Plaintiffs Arbroath platform. That had not beendonesatisfactorilyby the Termination Date. Such an investigation would have included considerationof any earlier failures or malfunctions in any of part of the jacking system (including but not limited to the componentsreferredto above) so that the underlying causes the with confidence. pinion failures and the reliability ofthe entirejacking train could be established (b) Furthermorethe Defendant(but not the Plaintiff) was aware at the Termination Date that testscarried out after the earlier pinion failures had shown there was a discrepancybetweenthe properties of the test couponsreported in the mill test certifiand ductility which were inferior both catesand the pinions themselvesand that the pinions had propertiesas regardstoughness to those statedin the mill test certificatesand the LeToumeauspecification.Thosepropertiesmadethe pinions more susceptible to brittle fracture. Thesehndings related not only to the failed pinions but alsoto the comparisonpinions and it is to be inferred that all ofthe pinions had similarly poor (though variable) properties.This reinforcedthe needfor further investigationand risk assessment before the Drilling Unit could safely be jacked up adjacentto the platform. The Defendantfailed to disclosethese the test resultsto the Plaintiff, but instead(in Mr Marcom's fax to Mr Gillis of l8 January1999) attemptedto reassure Plaintiff that the pinion failures gave no causefor concem. (c) Amoco will saythat it is to be inferred from the pinion failures and from the stateofthe jacking systemin the period before (a) risk of further failure. the Termination Date as set out in sub-paragraphs and (b) above that there was an unacceptable (i) becauseat leasttwo ofthe failed pinions (E3 and E6) had probably been subjectto loads beyond those for which they had been designed,the sourceof which had not been reliably identified or (so far as identified) eliminated; and (ii) becausethe low toughnessand ductility meant that all the pinions were susceptibleto brittle failure even at their design loads. (d) Further in February 1999 LeToumeau recorlmended and later carried out the replacementof the damagedhubs to the l/2 pitch pinions and recommendedthe opening for inspection of all primary gearboxes.LeTourneau also recommendedon 9 gear February 1999that there should only be "minimal jacking" until someof this work had beencarried out. All 72 secondary trains were dismantledand the parts replaced in at least 17 geartrains. Additionally at least4 fi.rther gearboxes were replaced. Amoco will rely upon theserecommendations and works as further indicationsofthe defectiveand/or unreadyor unfit stateof the jacking systemat the Termination Date."

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relies on the allegationsmadeabout The Contract containeda short descriptionof the Jacking System and its capacity'.Amoco tirmination under clause 28. The contractprovisions pit ortn" it as part ofits caseon repudiatorybreach.tt forms no "usefor the jacking.system are clauses 3 '1, 3 '2 and on which Amoco relies in ,rrpp# of its casethat BAb was in breach as regards i the generalobligations of "fitness for purpose" 6.1.2. These may at least loosely be described,as Amoco describedthem, not validly certified nor that it did not the (paragraphs to 37 and 59 to oo). But it is not (or no longer) alleged_that RGV was 35 *ar a failure to comply with the safety case or any safety-oblinor conform to all relevant laws and specif,rcations that tliere at.Arbroath' What is alleged (and was gations, nor indeed that the systemwas not in fact capableof performing adequately of the system that the RGV "could not developed during the tdal) is that there were suf;Frcientdoubts about the integrity it was not fit for its purpose' It is also properly be used in the North Sea" until the doubts had been fully investigated and so that for suchan investigationand that the delay involved in allegedthat BAO repudiatedthe contractby not acknowledgingihe need debateas to whether Amoco's "invescarrying it out was such as would itself be repudiatory. Th"r" was some considerable if in fact the jacking system was fit for its purpose' Amoco tigation' casecould properly be brought within these-provisions investigationbeforethe rig couldjack up submittedthat ifthere were suffrcient doubtsaboutthe systemsuch that they required the clauses even if investigationwould at the Arbroath platform then it was, or at least could be, unfit for its purposewithin my part I find this a somewhatarid debateand in later have revealedit was in fact fit to do so. BAO submits that is not ro. Fo. think the issue is one which can or any event one which is of no real sigrrificanceon my findings of fact. I do not, however, piinciple. To statethe obvious, whether the equipmentis fit for its purposedependson an as should be addressed a matter of purposeat the time it is requireduntil fifther analysisof the purposeand mattersof fact and degree.If it cannot be used for its But it doesnot take anyonevery far'The investigatedI think it may not be fit. To that ext# t agreewith Amoco's submission. EvidenceiChronology They and-themotors were wired up by The brakes were installed and set in Vicksburg by mechanicssupervisedby Mr Ford' was on 88' tt was found on about 17 September' electricianssupervisedby Mr Bunis. The firstlinion failure to be discovered and the pinion was found to be Mr Snow wasjacking the rig as part of the leg up when there was a loud noise from the B chord, and ofthe failure unfolded I think that both the probabilities of its cause broken. As the evidencein relation to the circumstances wired up immediately was first why they could not be statedwith confidencebecameapparent.There is no disputethat BE othersto smoke' walk to the river at vicksburg and that whenja&ing startedthe motor was seenby Mr Masseyand before the mis-wired. No other Rowan rig had its geartrains that it had been The probability is, as Mr euinn said and Mr Bunis accepted, phaseby connectingonly set in an opposingformation. The wiring was also "triple phase" but could in error be wired in single it piainly it should not have happened is not thereforedifficult to suppose two of the three wires to the samebusbar.Although gears or (if single phase)not that the gear had been mis-wired so that it was seeiing to tum against and not with the other the smoking of turning or turning only slowly becauseit was not receiving the full three phases power. In any event,following failure, or at leastthe final and evident the incident, the motor was unhooked.But at SabinePasssomethingmust have caused been re-set in the erfailure. Mr Snow said that both he and Mr Burris had thought it the time 88 failed that the brakeshad fitted had been wired up again.If so, whenjacking up began,no power had roneousbelief that the new motor which had been 'on' when the power is cut. Power is required to release but them. So the brakeshad not released beenapplied. The brakesare lack of any waming actedto'restrainthe pinion as the other pinions turned freely. The lack of power would also accountfor the releasedbut indication. Mr Burris' evidencewas, however, that he had on later inspection found that the brakeswere in fact the was adamant brakescould not have beenset let alone wonderedwhetherthat had beendoneto cover up a mistake. Mr Ford that it Mr releasedin such circumstances. Snow'sevidenceis supportedby the entry in his log andhis evidencethat he was told was releasedafter the pinion broke that the torque unwound.The brake must thereforehave beenon was only when the brake the when the rig wasjacking. I should note that I didnot think that Mr Ford'sevidencewas reliable in this regard-It was' I think, mistakescould occur under his command' product of i sensl of lolalty to his staffand an obstinaterefusal to contemplatethat any What I do think is cleai is that at an early stageit was concludedthat it was not likely that it would be possibleto achieve to preciseunderlying causeof failure. on inspectionit was found that there was no damage grcater degreeof certainty as to the gearboxand they were not changedout. After the pinion was replaced88 causedno problems' ih" motor, brake or It The failures of the pinions on E3 and E6 give rise to much the same considerations. is agreedthat the pinions failed under but of and severeover Joading in excess 1800 Kips. Again thereare a numberof possibilities all necessarily revcrseloading and require a gear or brake or wiring fault. Although differing as to the preciseoperationin progressat the time, both Mr Quinn rig during the final stagesof the walk vti Snowiaid, and I accept,that they had heard a loud noise on the starboardside of the

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at Vicksburg (Mr Quinn) or when the rig was being first jacked up in the river after the walk (Mr Snow). Both thought in retrospectthat this could have been either or both of E3 and E6 breaking, albeit jacking was stoppedat the time and an inspection had not revealedany breakage.There is, however, no evidence that any inspection was made from the leg ladders to which would probably have beennecessary seeany broken pinion tooth. Mr Snow said,and I accept,that when he later heard the noise on the B chord it reminded him of the noise he had heard at Vicksburg on the E chord. When the failures were found on 25 September(paragraph120), Mr Massey'sconcernwas more that they had not beenfound earlier than that they had occurred.They were not found as a result of any event that day but by workmen carrying out other operationson the leg. A fuIl visual inspection of all the other pinions was then canied out and no other missing teeth or cracks that no definite explanationcould were found. Mr Massey(anothermost impressiveand experiencedwitness) readily accepted be oflered. Mr Burris unsurprisingly favoured wrongly set brakes. Mr Ford again would not contemplatethat he or the mechanicswho worked for him could possibly have madea mistake. But brake binding can also be the result of mis-wiring. Whilst in the final analysisI do not think it affects the issueswhich arise, as a matter of probability I do think the burden of the evidence, in particular the evidence of Mr Quinn and Mr Snow and Mr Loflin, is that E3 and E6 in fact also suffered from mis-wiring and that the teeth failed or at leastwere fatally damagedat Vicksburg perhapsone during the walk and one during that they the jacking up in the river. The failures should have beendiscoveredearlier and Mr Masseywas right to be concerned itself was not a seriousone. Knowledge were not. But he was also right, as was Mr Butler, that the problem as it then presented jacking proof of performanceafter repair by the successful that the immediate causewas reverseoverloading and subsequent operations carried out in Sabine Pass after the pinions were replaced was enough. That would have revealed any firther but mis-wirings. The whole geartrains were inspected again nothing else requiredto be changedout. It is true that it is not easy to explain how the failures were only discoveredlater, but the broken teeth could have fallen away leaving the pinion in effect jacking operations.One tooth was never recoveredand one was found in the jacking case. to free wheel during subsequent of Neither was obstructingthe system.The only other theory that has credenceis brake binding because debris or rust or some fault in the brakes.Some witnessesfavouredthis theory. It cannot be excluded:seealso paragraph271. intermittent disMr Cowie was at SabinePassand leamt of the pinion failures at the time. There is no referenceto 88 (or the subsequent covery of the failures of E3 and E6) in any of his reports(preparedtwice weekly) nor in any of the recordsof site meetings.Mr Cowie did saythat he had raisedthe matter orally with Mr (Bryan) Quinn and Mr Rimlinger about twice a week during October during the walk. He also said Mr Quinn had referredto a and November. He said he was told the pinions were overstressed metallurgical report which was "inconclusive". Mr Quinn denies that he referred to a report in those terms. There are also different recollectionsas to the frequency with which Mr Cowie raised the matter. Whilst these disputesappearedto be significant, in the result I do not think they were. It is not in dispute that Mr Cowie did refer to the failures nor that Mr Quinn agreedto hand oyer any report if and when he got one nor that he told Mr Cowie that the failures were causedby over-stressing during the walk to the river, were not a seriousproblem and that, as Mr Cowie had seen,the rig had been successfullyjacked albeit not with the frequencyMr sincethe failures. Whilst I acceptthat Mr Cowie did raisethe matter on a number of occasions, told him of metallurgy tests, I also acceptMr Quinn'sevidencethat Mr Quinn did not referto Cowie thought, andthat someone (because was in fact unawareof) any metallurgical report. I think the totality of the evidenceis clear and both Mr Cowie and he Mr Quinn were honestly seeking to recall the events.The matter simply was not seen at this time as a serious problem or concem but rather onethat had beenresolvedfor practicalpurposes.Ifit had beenotherwiseI think it would have found its way into the documentsmuch more and in much strongerterms than it did. Indeed Mr Cowie frankly said that in mid-November (seealso paragraphl2l). So did Mr Amoco was satisfiedwith the explanationsthey had been given which seemedreasonable Gillis (Paragraphs 3 and 275). 27 Mr Dowdy of LeTourneauinstructedLAW EngineeringServicesInc to make and report on a metallurgical investigationofthe 88 tooth failure. LAW were able to seethe pinion andthe failed tooth. LAW reportedto Mr Dowdy by letter datedOctober21, 1998. LAW had testeda sampleof material from the failed tooth. The significant aspects the report were that: of i) "The majority of the fracture surfaceindicatesa brittle fracture mode and there is no evidencewhich indicatesthat the failure resultedfrom a casting inclusion or defect although there are inclusionspresenton the fracturesurface." ii) "Inclusions arevisible on the fracture surfaceand can be detectedmicroscopically.Although similar inclusions aretypical in castingsand have been known to initiate cracks,there are no indications which concludethat the tooth fracture originatedat

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such an inclusion." the characteristicsof a torsional crack which indicatesthat iii) .,The crack which is locatedon the main body of the pinion has material. The initiation point and the propagationof the crack the pinion had a torsional l,oadbeyond the physical limits of the pinion tooth . ' ' A torsional load could be createdif a force is suggestthat a force was applied on the left side of the subject at the tooth and anopposite force is applied at the splines." ffied brittle properties' The ..The mechanical trrt, conclude that the material near the tooth fracture surface possesses iv) "orriu"ted lack of ductility and toughnessof the material in this the elongation and reduction of area results of the tensile test illustrate atea-" KSI and the tensile strength149KsI (specification v) Mechanical testing showedthat the yield strengthofthe samplewas 139 and CharpyV-notch 15-15-10 Minimum elongationlias6'/o(10"/;,reduction in area7A%(35W 100 and ll5 respectively). but lessductile. Generallythat would specification ft/lbs (averageof l5). Essentiallythe material was strongeithan the coupon it would break later but faster' mean that in The "Conclusion" ofthe Report was expressed theseterms: failure was a mechanicaloverloadofthe ..The observations conductedand the data gatheredconcludethat the root causeofthe nature of the material, which may have contributed pinion. Althouglr fracture mode and crack propagationillustratethe brittle ability to withstand'" to this fracture, the pinion experiencedloads whth were beyond its physical what this comesto (in my terms) is that the Calling to an extenton the evidenceand explanationsavailableto me from the trial physical strength,it therefore had to fail somewhere,it failed in a brittle pinion ri/asreverseloaded,it was loaded ulyonJits put a figure on the load, but it was an "overload"' mode (which it is agreedit would whatever its properii"s;, the authorscannot is not was stronler than the specificationfor the test couponbut lessductile' The report In terms of the specihcationthe material below the specified strengthof the it failed the saying that .the brittle nature of the material" cau-sed failure in the sensethat they were satisfiedthat the strengthof the it because was brittle. Both Mr Bowes and Mr Dowdy said, and I accept,that material in the failure' sample testedwas so high that the low ductility was not a factor the and address 88 failure. None of All the expertsare agreedthat LAw had the best (if not the only) opportunity to examine the fracture surfaceis not a referenceto surfaceimperthem really questiontheir conclusions.The referenceto inclusions bn failure it is substantiallyacceptedthat fections on the pinions themselves.Had surface imperfectionsplaye! any part in the referenceto the lack ofindication that the LAW could have been expectedto say so. I agree;and especially tt itt ui"* ofthe fracture originated at an inclusion on the fracture surf;ace' the subject of "Jacking SystemDiscrepon 13 october Mr Rimlinger (Rowan) had written to Mr cupstid (LeToumeau) on .,mustbe addressed jacking systemcompletion" adding "pleasebe advised regardingthe ancies',enclosinga list of iiems which The list which was enclosedcontained large amountof oil level items is most likely due to lelakingoil sealing surfaces"' that the prwious day the gearbox-onE5 h.adbeen"raising cain" and had referenceto 2g gearboxes describedas "oil level iow". The the for it appreciated difficulties of been taken off line. Mr Ford was highly critical of the list doubting that ihoseiesponsible was not a Niehaus said the samebut also realistically acknowledgedthat filling the gearboxes checking the correct levels. Mr gearboxeswas probably about 8 to l0 popular job. It was Mr Niehaus' evidence (which I accept)that the number of leaking jackings which occur between of rather than 2g because the difficulties of readingthe levels and the possibility that leakscould by would be addressed topping up before the nextjacking' memorandumon the'No 6 On 23 October Mr Butler reported to Mr Dowdy (among others at LeTourneau) in an internal have never memorandumincluded "information" that "the gearboxes Gearbox oil Leakageand other items of Concem". The prior to 15 october" and a referenceto the report that 28 gearboxeswere leaking with the been filled to the proper oil level to be due to lack of lubriof comment that the accuracy thislnformation was "suspect". The failure of E5 gearboxwas found to a reference the probablecause The "Conclusions" included cation. The sealwas dented(as were sealson 6 other gearboxes). prematurebearingand gearfaiiures' similar to the of leaking from the oil sealsas installation damageuni rt t"d ti,ut "additional repair procedure"had two one describecin this report are likely due to the iistory of improper lubrication". The "recommended to that were found to be leaking with a procedure establish*hich cnes gearboxes provisions. First to repiacethe oil sealsin the

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wear due were leaking. The secondprovision was "remove motors from all gearboxesand inspectmotor pinions for abnormal this wear ls found . . .." The first provision was carried out either by to lack of lubrication. Rebuild each gearbox for which The gearboxon replacing the seal (in 4 cases)or the eintiregearbox(in 6 cases)before the rig left Sabine.The secondwas not. and 19 E7 also failed on 23 Octobeiprobably duelo lack oflubrication. There were no other gearbox failures before January only one incident since in Canadain December2000. that the Mr Butler said in evidence(and I accept)that not only was his report influenced by the information from a mechanic if with his secondrecommendation gearboxeshad never beenfiiled to theii correct level but that he would only have persisted low levels of oil. If it was only a small number,he had it had been confirmed that all72 gearboxes beenrun with significantly would have been contentwith to;ping up and dealingwith any failures as they occurred and perhapscheckingwith a stethothat the noise ma{e by a failing gearbox and U" ,r.rpredictable without warning (in the sense scope.He said whilst failures "o.ria *outd go unheard)it was not likely that more than one would fail at a time in such a way. What in fact was done,as Mr Neihaus said, was to changeout all the teatcingsealsand inspectthe motor pinions on those gearboxesand if there was any abnormal changedout. M. Dowdy acceptedthat if there was evidenceof under-filling then it wear in them the gearbox itself was a=lso gearboxes question.But Mr Cupstid had investigatedthe matterand was satisfiedthat in would have beenprudentto inspectthe were originally filled to the colrect level and Mr Masseyand was not the case.I do acceptMr Ford'sevidencethat ihe gearboxes jacking- Mr Mr Snow's evidence that ihe oil levels were (or at least should have been) checked and topped up before each walk to the river (when there was a Stone'sevidence,basedon the desigrrof the units, that the risk of severespillage during the tilt of about 14o) was limited to the gearboxesat the top in positions 7 and 8 on chords B, E and H and that no spillage could were even Thus only 6 gearboxes occur from those in positions I to 6 or on the other chords,was convincing and unchallenged. the tilt and, as Mr Stone also explained,the tilt was in any event in the "right" direction as it would take the reat risk from and maining oil to where it was needed.Thus any risk of damagefrom low oil levels from the walk only arosein 6 gearboxes only then after the walk was completed. On 9 November 1998 Mr Sleightholmewrote to Mr Quinn and Mr Snow (with copiesto Mr Cowie and Mr Hay) saying: "We understandthat Rowan are carrying out an investigation into the gear/pinion failures which were experiencedduring jacking operationsat SabinePass. Since this is of great importanceto the future reliability of the rig we would like to include it in our commissioningreports. a We would therefore appreciate copy of the report that you receive, if you are able to releaseit." It is notable that this letter does not refer to any previous requestsfor a copy of any report nor complain about a failure to respond to them. Mr Sleightholmehad also seen a number ofjacking operationsat SabinePasssince the failures which had been carried out without a problem as the leg sectionswere fitted. ADC's interim report (paragraph122)on the Jacking Systemcontainedthe following: i) Summaryl "The jacking system, seecomment,did causeconcernduring the team'searly daysat SabinePass,dueto We have higher than expectedfailure ratesof gearsand pinions. The latestjacking operationshave, however,beensatisfactory. by formally requested memoto the Rig Manager (Mr Quinn) a copy of the report of Rowan'sinvestigationsinto thesefailures." ii) Action: "Inspect all pinion gearsand racks for unduewear" showed Rowan's comment as "Done" and ADC's comment as "status ex Sabine is satisfactory"; and Action: "Visually inspect storm locking mechanism.Function test at least once" with Rowan's comment "Done by ABS as part of Class Surveys" and a "tick" from ADC. (Vlr Massey said he commissionedthe storm locks at SabinePassand I have no doubt that he did). iii) "Comment: At SabinePassthere have been recurring problems, i.e. failure of gearboxoutput pinions, gearboxoil loss and by buli gear failure. The oil leakageproblern is currently being addressed LeTourneau.Gear failure is also being investigated and is thought to be causedby over-stressingduring the walkout at Vicksburg. This could be true as the rate of failure is now much less. The most recentjacking operations have been okay. ABS are taking a keen interest."

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jacking designand-had way of knowing prior no whilst Mr Sleightholmesoughtto saythat ADC were not specialistsin gear or or not, ADC's commentswere clear and of coursesuppliedto to receiving any report whetiler there was still a seriousp.obt"rn and not questionedbY Amoco. Amoco's concemsabout the RGV as it was about to leave Mr Gillis, letter of 13 November @aragraph138)which enumerated passmade no referenceat'all to thi jacking system.Mr Gillis said that Amoco was satisfiedwith the fact that the rig had Sabine system was jacked up and down several times whilst the lels-were fitted a1 Sabine Pass which had demonstratedthat the an issue.That reflectswhat I am he He adequate. said it was not referredto in his tettei because did not expect it to develop into they were seen as quite satisfied was the view of everyone in any position of authority. The failures were not a concern; pinion was potentially exposedto a massiveoverload;there was commissioning problems; each failure had occunei when the As Mr Masseyput it, whilst but intelligent interestin the outcomeof further researches the eventsweri water underthe bridge. in the safetyof the rig or he of he was not involved in the investigationsinto the causes the pinion failures he was very confident regularly jacking it. IvIr Bowes would not have beenon it at Sabinewith a 400 foot air gap,120 or so men under his command point of view" albeit Mr said that ductility was not an issue in the desigrrof the system nor a concern from an "application point of view" into the low values' Benge wanted an investigation from a "scientific Mr Cowie wrote a "status report" on the RGV as at 15 November 1998 in which was included a note reading: ..Broken pinions. Amoco requested be notified of the resultsinto the inquiry into the broken pinions. LeToumeauhave not to yet respondedwith the results of the metallurgy tests on the broken pinions. seals'" to Gearbox failures. Rowan have beenrequested provide information on progressregardingupgrading ofgearbox Mr Gillis that In the closing submissionsAmoco sought to make much of the evidenceof Mr McNeasethat he had assured and therewas no questionat all pinion failures were not uncommon,the three failures had probably been causedby mis-wiring, unusualand over the safety of the rig. On the basisthat the evidencewas (as it was) that three pinion failures on one rig were gear train failures rather than specifically pinion failures was "wholly that Mr McNease'sexpianationthat he was referring to himself did not inadequate',,it w-assubmitted that this assuranc"*ir u lie. I unhesitatingly reject that submission.Mr Gillis or Mr Hosie he even recall the conversation.His evidencewas that the message receivedfrom Amoco personnelat SabinePass and it was okay''. That was the was that the failures were no longer a concem and Rowan "understood what was happening are of substance everyone'sacceptedview at the time. It was the substance what Mr McNeasewas saying.Geartrains which of the and I accept,that Mr Bowes had told him that in this sense weak overloadedwill fail at the..weak" link. Mr McNeasesaid, gear link in the 1000 Kip unit was the % pitch pinion in contrastto the 375 Kip unit where it was the bull gear. Failure of the constructionand commissioningare on the evidencenot that uncommonand I acceptMr McNease'sevidencethat trains during he drew no distinction betweenthe possible causesoffailure. Mr yoder was one of two authorsof a report dated 18 November, 1998 describedas a failure analysisof Brake Headson the RGV. The report records that during leg erection at Sabine Pass four brake heads were "determined faulty" by indication ground detector lights. The brake headswere replacedwith parts from the RGVI and the failed onesreturnedto Longview for coil to the degreethat the coil boxes inalysis. one was found not to be faulty. Three were found to have at least one overheated of one inner magnet ring also showed signs of roughnessdue to rusting which could have had iegun to melt. The surface prevent-ed from making positive contact with thi outer ring. Mr Yoder's conclusion was that rusting had taken place on the it *"." unavailable at first during the constructionphaseand later were not always in place. If the magnet rings because "orr".s he said the coils would overheatespeciallyduring a prolonged continuousjacking. brake head was not fully closed doubts (with which Mr Trickey agreed)that rusting could causethe In his evidence Mr yoder himself and Mr Ford expressed problem because discs are likely to clean themselveswhen operated.Debris betweenthe brake faces was a more probable the cause.Mr yoder also said that if you had to examine all the brake coils it would take aboutYzan hour a brake to do so once it had been removed and placedon a test bench.

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Mr Benge-It relatedto a visual examinationofthe failed A secondreport by LAW, dated 19 November 199g,was addressedto E3 and E6 pinions. Law's views were that: and exhibited comparablecharacteristics" " i) ..The fracture surfacesof Bg, E3 and E6 were similar in appearance in E3 and E6 pinions ' "'" are Brittle fracture mode characteristics also present surface and a torsional pinions !8 a1d E6 are nearly identical, Both possessa sfmi]1 Tuf"t" ii) The overall appearanceof o.f1he pinion fracture surfaceis similar tooth. The upp"-*r" P.3 crack. The determinedload was applied on the left side of the to the right side ofthe tooth'" to is oppositein nature. The load appears have been applied to the others,but fashion with the even and odd numbers opposed to each when it is remembered that the gear trains were set in an opposed that all three loadedto the left side demonstrates other,the fact rhat E3 failed whJoaded to tt " .iji rG anocq ?1d.I6.*h"" E3 and E6 failed when mechanically over loaded abovetheir specified were reverseloaded.There is also no disputethaitottr at location where there was no visible imperfection' tensile strengthand that the failures initiated sub-surface a In the "Conclusion" to this report LAW statedthat: ..Analysis of the basematerial of these pinions would provide a better insight to the root causeof failure and datato determine if the pinion conforms to the ESP specification'" mechanicaltesting of the 88 pinion. 6 setsof charpy test LAW also faxed LeToumeau on 25 November the resultsof further the test coupons.The resultsfrom samplestaken 1/8" results were provided all of which were u"to* it " value specified for was l5.ft-lbs' The results for elongation for the from the tooth surfacewere 4, 7,7 andE, E, 8 ft lbs. The specification "o.,pott were indeedworsethan those setout in results values-The and reduction in areawere also markedly u"to* it " spe"ified coupon with resultsfrom destructivetesting LAW report (paragraph 262). O'_2 and3 DecemberLAW provided LeTourneau the first rangedfrom 2 ft lbs to 9 ft lbs' E6 had the lowest values' But the of E3, E6 and the original test standpinions. The charpy values with, andthe valuesfor the failed pinions were the test couponvalues all exceeded ipecification, *tti"tr *ut ttrerefJrecomplied discerniblecorrelationbetweenthe averagecoupon also of the sameorder as for the test stand pinions. Therewas, however, no and elongation of the couponswere all within the values and the pinion values. Similarly the values for reduction of area were agreedthat the charpy values on the pinions were specification but the pinion values were markedly lower. The experts ..remarkably"low and as to any iignifi"*"" to to be attached it' It is also, I think' low. They disagreedas to whether they were betweenthe coupon and the pinion values than a better correlati,on the burden of the evidencethat LeToumeau had expected agree)expectedthem to differ and the pinion values thesefigures, albeit Mr Bowes and Mr Dowdy haa lrightty, as the experts to be lower. Bowes and Mr Dowdy) that an "in-depth evaluation" On receipt ofthe secondLaw report Mr Bengerecorded(and notified Mr '1o determinewhether the cracking could have been detected was to be carried out of cracking observed in asample from 88 cracks(to which aloneultrasonictesting applied) and so of when ultrasonictested,'uy rsc."rni, was a referenceto sub-surface points about sub-surfaceflaws are that they may Amocg'r very limited relevanceto the present metallurgical issues. -only of that they required to be investigatedat 19 January.In the event the results indicate the likely existenceof surfacefla*s ani thought this firther Mr Cupstid the evaluationwere not availableuntil Aprit 1999 andp.wedio be of no matenalsignificance. ..eccentricand unneceisary" or a luxury. Mr Bowes said that after the secondLAW Report the investigation investigation was the flaws were not in with which he was not concemedor involved at all. He knew in Decemberthat was all ..appliedresearch,, by the testing. If anyonehad thoughtthis evaluationwas urgent a critical areaand were smallerthan the maximum size allowed Dr Slater said it could have been completed in a "couple of days"' jacking system.Mr Price and Mr Jonesof The F7 Faihire on 12 Januaryoccurred when Mr (Bryan) Quinn was operating the jacking nad ueentwice intemrpted ro allow Racal to install a positioning instrumenton Amoco were on board at theiime. The warning light After about an hour an over-amperage the bow leg and to allow a wire to be releasedafter it had becomesnagged. who reportedthat they to investigate for F7 had come on andjacking was stopped again. Mr Quinn sent two crew members

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motor' There is evidence the rerease brake manually and disconnectthe could see nothing wrong. They were instructed to done no one heard the torque spin out of the motor' wfen (including from CaptairiBroertjes), which I u"""p, th{ thut.*1 tooth of the pinion i"ard to. break. on inspection it ys !9und that one and the pinion was i*-"iiu:t"rf Jacking was resumed the rig in the opposite it out. Mr Quinn "bumped" Ii was decided to was cracked through but still engaged i' tn" ,u"1. ",,i It was for this reasonwhen he only then that the torque was heard to spin out. direction to take the load offthe pinion and it was was not (as he had at first thought) No 6 that the cu.rle or failure was informed of it that Mr euinn believed (*J i u"""pt) set' In consequence u""u.rre of debris or becausethey had been wrongly had bound gearbox failure but that the irakes they had cooled by the time the rig "itt ", build ul of !r91YhT:* of the the when..released,, brakeshad not in fact done so because and if it had but the brake had not the torque would .,-t ** no noise from th" g"u.u* io ,uggest it had failei was bumped. list (paragraph "." wi! not one of the gearboxes,ol.Mr Rimlinger's row oil have spun out when the brake was first..."l,r"r"d,r. rz (paragpph 26E)' during the walk 266) nor one which could have suffered severespillage was perhaps ofthe brake but only the gearboxafter the failure' That no BAo has beencriticised because examinationwas made which remains uncertain albeit corrosion revealed the causeofiailuri unfortunate but not sinister. lt would not n"""rruritf t uue days later he told Mr O'Brien in the presenceof explanation.I acceptruri Q.ri*', evidencethat a few or debris is the probable the entire brake in shouldit recur, it would be-addressed future by taking Mr price that the causewas a brake problem *Jtni, was happy with this explaq,,inn said, and l_alsoaccept,that Mr o'Brien head off if there was an over-amperagesignal.i[r 168 and in Mr Marcom's letter sent on 18 January$aragraph was i., nation and solution. The explanation "ff""ti"p"ated Appendix B, 3). F7 was left accurately,bumt offby a welder. That-tookabout 8 hours' In the eventtwo teeth ofthe pinion were cut out or, more ai the time the hull comesout of the water as it is 10 foot waves static andjacking was l."r.r-"d. The RGV i, ,uiJio withstand but at the time when the rig had achieveda l5' air the seasat Halley North iid reach over 10' in height jacked. on 12 January CaptainPique saidthere were Gray said there was no emergency. gap. Mr Quinn saidhe was not concemedat the ,eu te.,,"t.Mr to jack through and Mr Quinn said that had it beenreally necessary no safety concems.So did captain Broertjes. notr, rrrrtGray and controlled. But neither of the processwas carefully monitored the broken tooth then that could have been done provided had ever knowingly done such a thing time becausett*." *ur no ,"*o., to do so and neitirer them even thought of it at the be very much a last resort andwould involve the risk of before. Mr Gray and Mr Quinn readily u"""pt"alu"tin8Jhroug1.would this in be managed. i{aving seen and heard them unshaken on further damage and unknowns but they *"." "oilfrdeJit could cross-examinationI am confident they were right' if the failure of F7 had been replicated alongsidethe Arbroath It was not even put to Mr euinn in cross-examinationthat greaterconcern.Mr Quinn said, againwithout challenge' if platform rather than at Halley North there would have beenany or only hun" occurredin very good weatherallowing time to cut the RGv had beenjacking up alongsidethe pl;tfo; that would out the teeth. asto said failur_es) that althoughtherewas someconcemon the rig captain Broertjes(who did not know ofthe previous pinion rig had been in any way compromisednor that the safety of the the causeof the failure of F7 he was not at all worriei that the pointed oul tt]at-aft:r the teethhad beenburnt offthe preventedthe rig from jacking alongsideArbroaih._He failure would have experience)said: (who had considerable jacking systemhad worked withoula prour"* ut"Hatte] Norttr itself. captain Pique pinions rig ..I was not unduly concemedby the fact that one of the pinions in ^the had sheared.I havebeen on severalrigs where about two pinion failures do occur from t-imeto time-" He said he was told at the time have broken during jacking operations. that to not suggested him in cross-examination this view previous failures but that d;d not affect his view of the situation.It was was unreasonable. or ADC about the F7 failure' Nor did Mr Jones' Mr no Mr price expressed concem to anyone on the rig fiom RowanlBAo to the rig on 13 January'Mr Price handed price,s contemporaneous notesreflect no concern.Nt o'Bri.n and Mr slater returned ..observ-ations/concerns". or the jacking system' Mr Price's explanation in There was no mention of pinions over a list of his the matter offact natureofhis notes and the that he hid his alarm so u, no,,o createpanic can hardly explain cross-examination ADC's daily reports aftet 12 Januarymentionthe F7 failure' onrissionto include it in his list for Mr o'Brien. None of

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referredto the pinion failure and the needto evaluate 1-6-2) Amoco,s (Mr Gillis) fax sent on Thursday 14 January@aragraph He read it, as Mr Gillis intended, as suggesting a meeting the risks arising from it. Mr Marcom received trre rartnat "*ning. at ee rig at the eJatfoir-IlJh:-nsk of a problem occurring would be arrangedto conduct somekind orH-opi"ror"i*8ry:q preparedfor l9i8 (paragr?phs114 and 121)' The rig was being in that time had alreadybeen addressed June urrdNo'"-Ler Marcom did not for ,aia to Uea compellingsafety reaso-n not doing so' Mr moving to Arbroath without referenceto what is no* 165and 166)'His 15 JanuaryuntiitntoniaylgJanuary(paragraphs receiveMrDenholm,sletterfaxedontheeveningofFriday Mr RimIt was basedon information obtainedby telephonefrom sent at 19.41trr'"i reply on the jacking systemwas """ni"!. by then termination was proceeding and I am quite satisfied that ringer and Mr euinn. rn effect, unknown to Mr Marcom-, Mr lndeed what he did write was given scant'if any' attention' whatever he had said or written would have made no difference' the evidence I should addthat insofar asthere was a conflict between Gillis was unableto explain or justify his lack of ;*d;r;. and Mr Rimlinger did matter i oJ""pt ,ftu, at this time Mr Marcom was quite unaware of Mr Marcom and Mr Rimlinger on the pinions' not tell him of the existenceof any reports by LAW on the about the failures of B8' E6 andE3 ' The letter McNease -(Rowan) on I g JanuaryMr Bowes (LeToumeau)wrote formally to Mr when reverseloaded' It pinion teeth had sheared (rightlv) that all the referred to and enclosedthe two LAW reports. itri"tla t911e river but gone unnoticed at the time' 88 was said to ti" *af. the expressed conclusionthat all three had ,tt"ut"J a*i"e g': and E6 had probablysufferedfrom the urrau"ruirtyuroad hint given ttrai beenmis-wired in a single-phare have "orrfig*atio' LeToumeau'sopinion tf,at the design, manufactureand installation of the same or reverse mis-wiring. The letter ""pr"rr"J ..adequate tle normal op"titittg and severestorm design events"' for systemwas on usualmonthly meetingbetween LeTourneauand Rowan held The letter was preparedfor and delivered and discussedat the at the meetingthat the 88' E3 and E6 Mr Bowes explained l9 January.Mr McNeaseand Mr Rimling". *"r" f."rent fol l-owT' brittle mannerwhen their yield in u be lessductile than exfected andthereforemay have failed T:t: pinions had been shownto overload' He also said that it was believedthat the failmechanical strengthwas reachedbut the causeof failur" *ui **riue of probably the consequence mis-wirings' There is some unceroccurred or been initiated during th" ;;lk and were ures had documented Rowan ttre law reports were fip1p-rwided' This is the first tainfy on the evidenceas to when and to whom at Pass'The probability' as I find' of ,h" ,"po*, shortly after the rig leftsabine record. But Mr Rimlinger recalledreceiving by "opi", was also assured LeTourneauat alone was aware of Law's conclusionsbefore this meeting. He is that he alone did so and he told him the pinion was strongerthan specified"but Mr Dowdy the time (Mr Dowdy) that the conclusionswere not a concem. '' it breaks it is brittle. It will not bend much, it is just going to break if I think, however, that it was both frank and straightforward' LeTourneau,sletter has beenthe subject of criticism by Amoco. So was areferenceto the indication systemacting as a warning The referenceto miswirings was, as I have held, probably right. letter sent on 8 Februarydid not, as Mr Bowes said' affect the as it had with F7. The changesmade to the finaf version of the ofthe letter, and were also accurate' substance on the pinion failures would be suppliedto Amoco "it that Amoco also submitsthat despiteRowanrBAo,s assurances reports evidencethat he did not have copies of any of the appearsthat this was never the intention,,. I reject that. I acceptMi Quinn's they were incompleteand first two reportson because LAW Reportsto give to anyone.Mr fumlinge. ,uia tr. ttuo noipassedihe the as stated,that insofar as the reports addressed earlier he never heard fiom Amoco again after tt ,ig Lft A-erica. f think, " unier the bridge and Amoco (and ADC) had in effect beentold (and rightly told) failures the matter was thought to be water the essentialinformation together with the subsequent that the cause was reverse over loading. That was, ln my.luagment failure of F7, and whatever criticisms may be made of the successfuljacking operations,as Mr Marcom believed. After the to respondby supplying any reportsbefore which followed, there was no realistic opportunity for Rowan/BAO correspondence Amoco claimed to terminatethe contract. and Mr (IUel) Thomson.As Mr Sleightholmeput it' he The ADC final report (paragraph199) was preparedby I\'Ir Sleightholme comment" that "one pinion tooth broke when jacking did not disagreewith Mr Thomson,saccount recordei as ADCis "Final "copy of Rowan's investigation report has been requested"' Mr up in North sea, but breakagerate is u"""piuit"," and it not his areaof expertiseand he discussed with nc Thomson,sevidencewas that he really knew little :ibout the failure, it was

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one although he (and not Mr Sleightholme)as ADC team leader was on the RGV from 12-19 Januaryretuming to it by heli' copter on the l2th only shortly after the problem occurred. He said he probably should not have made the comment and Amoco's caseis that it was wrong. But at the least I am quite satisfiedthat the commentreflectedthe lack of seriousconcernof all those on the rig at the time, inctuding Mr Price and Mr Jones(paragraph2S8). Mr O'Brien's view and my commentupon it are to be found in Paragraphl94(vi). LeTourneauheld an intemal meeting to review matters on 3 February 1999. In the course of the meeting Mr Benge'sNotes record Mr Eckerman asking Mr Bengethe question: ..Would you feel comfortablein being on RGV under adverseconditions with the pinions being operated?"Mr Bengenoted his 'J.{o" but also an interjection from Mr Bowes that Mr Benge was unqualified to make "that own answer to this question as becausehe was not knowledgeableabout "its redundantsystems".Mr Bowes did not rememberreferring to redundecision" dant systems.He did remembersomewhatforcefrrlly making the distinction betweenan applicationsengineer(himself) and a metallurgist (Mr Benge) who did not know the application, design loading or desigrrcriteria. The conclusionto the meeting recordedby Mr Bengewas that LeTourneauwould continueto work with PSC to determinethe causeof the failure andthe lack of correlation betweenthe pinions and the test coupons.Mr Bowes said LeTourneauw.ts not going to stop that. This document was one on which Amoco understandablyplaced considerablereliance. Mr Dowdy was not presentat the meeting.He said the causeof failure was for him "open and shut" at the time: extremeoverloading from a reversedirection.He also said the strengthof the failed pinions was known to be adequatefor proper firnctioning in normal operation.That was also the view of Mr Bowes. 'the mechanicalpropertydata to A third report by LAW was dated4 February 1999.It was addressed Mr Benge. [t summarised obtained from the samplesremoved from 88, E3, E6 and Test Stand" pinions. A draft of the report had beenprovided to Mr Benge on l8 January.Some ofthe test resultshad been provided earlier (seeparagraph281). Samplestaken from the pinions had beenmechanically testedto destructionby LAW. The sampleswere taken from l/8 inch and 1 inch from the surfaceand at the centre ofthe tooth. The original API 8C test couponswere also taken I inch from the to surface.Tensile strengthsand Charpy V-notch testsat -40"C were carriedout on the samples.The resultswere also compared (MTR) of Pacific Steel.LAW's "discussion of results" included the following: the Mill Test Reports are tensilestrengths "... the material testedhasa tensile strengthwhich lies within a range of 122KSI to 165KSI. The averaged Report (MTR) with the exception of the test standpinion. The elongationandreductionof arearesults higher than the Mill Test for all of the pinions are substantiallylower than those listed on eachcorrespondingMTR". and lateralexpansionvaluesindicatethat the materialfrom "The Charpy values arebelow I 0 foot pounds.The shearpercentage which the specimenswere removed is brittle at the test temperatureof -40oC. These values are consistentlylower than the valueslisted on the MTRs." The Charpy resultsobtained from the test standpinions were however similar to thosefrom 88, E3 and E6. Mr Bowes said (and I accept)that LAW did not provide yield strengthresults for many of the samplesdespiteLeTourneau's requestbecausethey were concemedthat the high yield strengthsand low reductionsof areaobservedmeantthat their strain was sentto gaugesmight be damagedby destructivetesting. An updatedversion ofMr Bowes 18 Januaryletter (paragraph29A) Rowan (Mr McNease) ABS and DNV on 8 February enclosing all three LAW reports. FTI Anamet, a testing laboratory,reportedto PSC on the fracture faceof the E6 tooth on 26 February.The clear conclusionwas that failure was due to "gross overloading". The report is, I think, ambiguousas to whether any castingflaws were seenon the surfeceofthe tooth as opposedto the surface ofthe crack but clear both that there were internal castingflaws and that flaws (surface and internal) had "nil involvement" in the failure of the tooth. E6 was the tooth with the lowest (or "worst") Charpy results.PSC seni this report to LeTourneauon I March.

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the to assess extent of hub to carry out an inspection of the Yzpitch pinions In February Mr Mobbs went to the RGV in Dwrdee been leaking sealsin August-1998 which he said had soml wear. He found a number of oil leaks at seals.fi" it"al"i,*ed a maintenancecheck they or at leastlll o"fth". *"r". bn 6 January replaced although I think there is some real doubtwhether out in a report dated9 to U" worn' Mr Mobbs' conclusionswere set had shown some 14 sealsto be leaking *d 5 th;;l*", Of and seal replacements' Plority'. wear and to require "High. lrub February. 13 units *"." found to havl 3/16 inch o.Lor" ue timited to minimal only'' until they had been that'Jacking these 13, 4 were sufficientry wom for Mr Mobbs to ,".orn-.nd Priority" and 7 were found to require only seal incir or more wear and *"r" to be replaced * "N"i repaired. 8 units had Z, replacement. only because jacking.to minimal" until the four had beenreplacedwas In his evidenceMr Mobbs said that his caution to keep to necessary do so' But th" rig wll stackedat Dundee' it was not he did not want to causefurther wear by jacking when, 6""u,r,i jacking in any way' He said the wear not haveinhibited or affected had the rig been going to Arbroath the ,tut" or*"u, *ould jaciing without a problem' I acceptthis 20 to 30 hours (or 2 to 3 years) of normal he saw wourd still have a'owed another geartrains led to a minor redesignof the secondary of hub -ear p-fr". evidencewhich was not substantiallychallenged.rt " between thrust plateswere changedout by LeToumeaumechanics on the RGVI and RGVII. The % pitch pirrion seuts,t,rb, and March and JulY 1999. why test piecesremovedfrom the four and debatethe reasons LeTourneauand pSC continuedat a leisurely paceto investigate Mr Dowdy said' however' that what was very clear from failed pinions had low ductility values' No satirryi,,g u"'*"'-"*"'g"d' than strong pSC had proa.r""i pi"nion, oru"ry high tensile ani yield strengthswhich were more all the investigationswas that of None had failed because a lack of to an extremeoverloadcondition. enoughto perform their function and hai only failed due that effect' LAw reportedon F7 in September1999 on 9 July to toughnessor ductility. Mr Neely of PSC wrote to Mr Dowdy were essentiallythe same as for 88' E3 and E6' anJtheir findings of any kind tests.Neither required any further testing of the pinions Both ABS and DNV were informed of the results of Law's (paragraph approvalsirey iraa given for the RGV' As stated (metallurgical or otherwise)nor didthey lsvise or withdraw the a manufacturing ..originul ,h"ory" that th; iailwes *eie d.t" to overloading and not 202) Dlw did seek confirmation of the History received it in ttre form of Mr Neely's 9 July letter'Jacking defect and *e.e content*t "r,rt"v feet for the January1999 the systemwas jacked for a total of 9'124 Mr Rimlinger calculatedthat betweenJune l99g and12 over a year' assuming5 weight of the hull. In normal operations greatmajority of which (E,343feet) it was loaded with the full hull' That gives an idea of the jacked only.o-" ioo feet when loaded with the full weight of the rig moves,the rig would be degreeofjacking was the procedureadoptedfor ..proving,,ofthe systemprior to termination ofthe contract.The reasonfor this jacked up againso ft" 'ig was.jackeddown ti pick up eachleg section' fiuing the leg sectionsto the rig (called "l"ggi;il;t. section' leg by leg' jacked down again and so.on sectionby that section could be titted to the top of tire existilg'r""tion,-,u.,0 on it at the time about 600 f"uring the full *"ight of the rig ino ttt" equipment That would of coursebe done with the ,yrt"Kips per pinion. of at SabinePasswith partial preloadwhich imposedpinion loads In early Septemberl99g the rig wasjacked out ofthe water per pinion' a static preload imposed loads of about I I 00 Kips about 800 Kips. on r o ieft"*io (of no relevanceto the issues)the rig wasjacked with preloadon ln November 199g,as part of someteststo check load sharing one each.pinionwas 1260Kips and the rig wasjacked through the starboardleg. N{r gowes calculatedthat ttrsl,oadimposed-on pinibns on the starboardleg was successfullyloadedto that the 24 complete revolution. Thus each of the 7 teeth on each of extent. dout't of the readingswhich yerg t-a\enat the time' there is nc Although both Mr Trickey and Mr Hogg questionedthe accuracy ocean the RGV io sable Islani (Nova Scotia) in the Atlantic that in octob er 1999in the course of a wet tow from Dundee the keel' The lowered with the tips of the spud cansover 150feet below a experienced severestorm when the legs *"." puniuny

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jacking system was subjectedto high pinion loads. Mr Dowdy calculatedmaximum loadings in excessof 1500 Kips on 34 fipt on lb pinions and 1700Kips on 4 pinions. Whilst thoseprecisefigures have to be treatedwith considerable li.tioni, iOOO iaution, there is no real disputethat significant loadings would have been experiencedand were withstood. The RGV sought shelter at Falmouth. It is the unchallengedevidenceof Mr Quinn that since the RGV left Dundee it first went to work on 29 March 2000 offshore Halifax, Nova Scotia, Canada.No unusual problems have occurred. Downtime has been limited. As at the time (13 March 2001) he gave evidencethe RGV had beenjacked up and down a total of 22 times at Dundee, Falmouth and at Halifax. On 9 occasionslhe jacking was next to live platforms. These operationshave been carried out without incident or pinion failures, a light cameon for El as the legs were loweredon approaching savethat on one occasionin December2000 an over amperage platform. That was successfullydealt with in about an how by disabling the gearboxand completing the move to the platform. bwing the 9 static preload operationsbetweenMay 1999 and December2000 the averagepinion load per leg exceeded1200 fips with maximum loadsin excessof 1400Kips on somepinions. Of courseAmoco is right to submit thatjacking undertaken since l9 Januaryis irrelevantto how thejacking systemshould have beenviewed at that date. But it doeshelp to establishthat if it was thenjudged to be fit for its purposethat judgrnent was right.Pinion Loads It was Mr Hogg's calculation that the maximum vertical load on the pinions with the StormLOKs engagedwhich would be experiencedaiArbroath in a 50 year storm was I124 Kips. That evidencewas unchallenged.LeToumeau'scalculation(made byMr Mobbs) in December1998was 1327Kips, later reducedto 1289Kips (paragraph230). Mr Hogg and Mr Trickey agreed But they that in the 50 year storm condition at Arbroath loads would exceed1800 Kips unlessthe StormLOKs were engaged. that to justiry a could be engagedwell before such loadings were experienced(paragraph230). There was also agreement desigrrloading of 1800Kips a measureof excesscapacityis required of the order of 15 to 207oso that testswould, for example, have to establisha capacityup to 2l 15 Kips to justify the design loading of 1800 Kips. Mr Hogg's calculationsof maximum loadings in "Drilling Condition 1" were also lower than LeTourneau's:1444Kips against 1842 Kips. Again thosecalculations by were not really and ceftainly not convincingly challenged.lndeed Mr Hogg said they containedan elementof conservatism making no allowance for foundation "fixity'' (resistanceto leg bending moments at the foot of the rig) which Mr Trickey accepted would reducethe loadings further by some l0o/o,that is from 1444Kips to 1300 Kips.Expert Opinions As will be apparentfrom Appendix D no less than 1l experts gave evidenceon issuesspecific to the Jacking System.In adthe dition, Mr Bartle and Mr Possaddressed evidencefrom the standpointof how a "reasonableand prudentoperator"should expertise. have responded,and evidencewas given by witnessesfrom both LeToumeauand PSC which involved considerable Captains Mallett and May consideredthe responseof the Rig Mover and Warranty Surveyor to the facts. To a great extent the volume of evidence resulted from Amoco's developing casethat the pinions were not or at least could they were or might be liable to give way under loadsthey reasonablyhave beenthought not to be fit for their purposebecause should have been able to sustain.That casewhilst derived from the fact that there were 4 failures of pinion teeth(as well as the other mattersreferredto in the claim) was substantiallybasedon what I shall refer to overall as the metallurgicalissues.It is to those issuesto which I shall first tum. on There are a number of specific expertisesinvolved. Each expert'sopinion was to a considerableextent dependent the views of others.The target was or at leastbecameto establishthe minimum size of surfaceflaw on a pinion which would createa risk of a tooth failing under a given loading and to addressthe questionwhether the inspection (MPI) carried out by the manufacthe turer (PSC) would havecapturedand removed a flaw of the deducedsize.Fracturemechanicsseeksto assess critical size of for the flaw and stresswhich could lead to failure; the metallurgistsaddress propertiesofthe pinions andthe reasons the known failures; the expert on MPI considersthe processof detectionof flaws and the "probability of detection"(POD) expertsaddress the just that: how probableis it that a flaw of a given size will be detectedby MPL Expertiseon pinion loadsaddresses question given loading is probableat Arbroath and has alreadybeensummarised. whether a the I confessat once that after hearing the factual evidenceand as an untutoredmind I approached materiality ofthese issues degreeof scepticism.The skills involved are ones with which I was wholiy unfamiliar and potentially a lessthan enwith a thusiastic student.But the skills of tire experts in explaining their subjectswere such tha' not only did they make the subject

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confidence.However the result was that it servedto with reasonable interesting but one where the issuescould be approached a admittedly statedcrudely, advancedby Amoco in the reports on which it relies was that confirm my scepticism.The thesis, and could lead to a tooth be detected surface crack at the most wlnerable point on a pinion of oniy 1.5mm in depth might not -6' c (the "maximum safeloading')' yielding under a load of 1300Kips. After furthei analysisthai figure became1636Kips at depth' both expertsassumeda depth to length crack ratio of 1:5 for a crack ofthis required by ABS andcarried I have seena model ofthe pinions. I have seenone ofthe broken teeth. I have set out the testing in the designwas strength(paragraph237). The pinions have in out by pSC (paragraphs234to 236).The goveming propefty 4 incidents of % pitch pinion failures fact been extensivelyusedboth before andafter thJfailures (paragraphs305 to 309). The did by which there is no disputethat thi failures were caused massive overloads.That meansthey are ones in respectof two of probability is-thatthe not fail at anything like 1300 or 1636Kips but at a load well in excessof 1800 Kips. The overwhelming when reverseloaded' As for 88 I same occured with the other two failures; certainly there is no disputethat they too failed of F7 PlofessorMiller's evidencefrom examiningphotographs zez toies. As for have consideredthe evidencein paragraphs region of 2600 Kips before failure. That evidence,grantedit camelate,.was the failed pinion was that it suffereaa toaa in the a surfacefault playedany really unchallengedand certainly unshaken.Moreovir there is nothing on my findings to suggestthat The mode of failure was brittle part in any of the failures. ln the caseof F7 there was nothing of the surfaceleft to examine. cracks'Those fracture as all the expertswould expect.But the causeof failure was overloadand had nothing to do with surface pinions were indeedstrongerthan specified despiteand notwithstanding findings mean that despitethe low charpy values the the low values or brittle character. crack of I .5mm (let alone I -Zrtl ln dgnth (and 7'5mm in length) on that an undetected It struck me as extraordinaryto suggest Much more could causeit to fracture as Amoco's metallurgical evidencesuggested. the surfaceof one of thes" -usiuJ-pinions 'lvhen I saw-these professor Miller said tre iraa naalust the samereaction when first askedto addressthe problem: importantly 'This cannotbe true"'' once ProfessorMiller had condimensions quoted of 1.2 and l.5mm my engineeringjudgment said was somethingof a tourde force, I would doubt if anyone cluded his evidence,which, despitevery-skilful cross-examination, to agreewith him.FractureMechanics who heard it (and all the relatedevidence)could have failed .contest,was betweenDr Manteghi and ProfessorMiller. In fact the contestwas a somewhatunequal The fracture mechanics on theseissuesduring the match. It needsto be borne in mind that reports and evidencewere being producedand developed criticisms of ProfessorMiller's evidence are I think wholly misplaced.Both trial and seen in that context many of Amoco's two' Dr Manteghi expertschangedand developedtheir opinions. There was a fundamentaldifferenceof approachbetweenthe which the low toughnessand ductility ofthe pinions raised a questionabouttheir susceptibilityto brittle fracture believed that proiessor Miller consideredthe correct approachwas to analysethe causeof the actual required a fracture mechJnicsanalysis. that the prototype ofthe pinions. He also considered faiiures which alone gaverise to any possiblequestionaboutthe adequacy analysis: theory is approximate,the experiment tells you the truth. It may be tests were far more valuable than theoretical that they wondered how expertscan producefigures ofsuch precision as a flaw of 1 or l.5mm depth. However there is no doubt orientations.Moreover as can, but only by making choicesabout flaw shapes(gape), sizes and locationsand crack and stress (the other 'known' is the evidenci proceeded-itbecameapparentthat ihe rul*datu which formed a vital part of the calculation to very conat the maximum principal stresses the tooth root which is calculatedby finite element analysis) was itself open Miller (paragraph250), the criticisms of Dr Slaterand Professor they are assessed siderablequestion.when it is explainedhow it generallyand tire values actualiy available for the pinions were in my judgment well made.To describe as a of Charpy values ..primitive', -"*1i." is, if anything, an understatement. explains why taking a single Charpy value ratherthat an averageof a It ofCharpy number ofvalues is not gooj praclice. That is not to doubt (least ofall in the centenaryyear for Charpy) that the use practice.It is. BS 7910 provides for it. But the limits of reasonable ialculations is an acceptedand values in fracture mecha]rics it must be acknowledged. The values need to go through a process of extrapolation and correlation to obtain a fracture yei it was the only raw data which was available for the calculations. toughnessvalue. ABS-did not require Charpy lru--lu"t. testing of the it did Fraiture toughnessdataobtainedty direct measurement not exist because formed no part of the designor relatedto the couponsandit was known The specification pinions and was not carried out for the purposesofthese proceedings. the pinicns r,r'ouldhave different and lower values. ''the situationwas clear Dr Manteghi maintainedin his first report that giving the benefit of everypossibledoubt to LeTourneau

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service'" The fifiress for service that I had adopted were unf,tt for eut that these things (the pinions) with the definition of he mm in length because did not depth of lmm or less and 5 to l0 definition of fitness for service he had adopted*a, a fla* that at a loading of 1800 Kips and a and his calculationsshowed believe that such flaws could be reliably detecteJby MpI and at the sameloading but a -407deg;c the maximum tolerable flaw size was ressthan that depth and length temperatureof to atArbroathj the maximum tolerable flaw size was I '2 temperatureof -6"c (the lowest temperatureriteryio ue experienced which also probably could not be detected' 1.4mm depth and 7.2 to l1.6mm long which *# u size 6oc was but still concluded that the maximum safe load at minus ln his supplemental report Dr Manteghi revised the figures Yet the only pinions could not be reliably detectedby MPI' 1636 Kips assumingttrara flaw witnl depth of resstian 1.5mm Dr Manteghi'sfigures' to an extent in excessof desigrrand vastly in excessof ever to fail did not fail until they were loaded Miller's analysis which led to Dr Manteghi's results' Professor I do not think it necessaryto examine and set out the detailed order to Dr Manteghi'sand' if reliable' ,"chniques,producednumberswhich were of a different analysis,also using specificationand far greaterthan anything "roiiirt "a pinions were well uut" io withstand loads up to and in excessof that the established profesior Miller's conclusionwas that if the flaw was l '5mm deepthe 'U' factor' But he which could be expectedto be experiencedat Arbroath. even without allowing for what he called the could withstand a loading at -6oc or tgto oi tt3l Kips tooth in stresses the .U, factor which was an attemptto represent residual compressive also consideredthat it was wrong to ignore the extent of the constraintexercisedby ..late in causedby the stresses and op*ing tooth and (less significantly) the "tr"o" ".u"r unaitr"tip which was being assumed the analysis' Dr Slater was wholly confor the notional the material surrounding ".u"t ifter the tempering cycle)' the last processin the heat vincing in explaining triw the "mini-quench', iu tttot water-cooling both at the surfaceand at a crack tip only 1'5mm stresses treatmentof the%pitch pinion, would create,igrrifi.unt"ompressive have a marked effect in reducing the risk of fracture and below the surface. It is professor Miller,s opirriin tnut these'factors roseto a rangeof 2410 to 2693 Kips' must be accountedfot. ff tft"y *ere his "*u*i-,rn-l safe loading" I think it sufficient to statemy overall conclusionon this evidence: which can have a very marked and assumptions i) The calculationsinvolved are subjectto a number of uncertainties ofjudgment' effect on the outcome. There remains room for a considerabledegree worst casein terms of the and ProfessorMiller both addresseJwhatmay be called the ii) There is no disputethat Dr Manteghi principal stress)and shape(sharptipped) of to maximum location (on the highest line ofstress) a.rao.ientation (perpendicular crack. the postulated has,evenwithin the parameterof the "worst case"been iii) Despitehis claims to the contrary, I do not acceptthat Dr Manteghi views matterswith which other expertshave dealt I prefer the in any way favourable to LeTourneau.tn part that is becauseon I But it is also because much prefer relied. understandably of BAo's expertsto those of Arnoco,s expertson which Dr Manteghi think I and professorMiller which had a refreshingand compellingriality abo-ut-them because do not the views of Dr Slater and 'u' factor and in his selectionof a pa*icutaiin t";."ting any Dr Manteghi was able convincingly to maintain his position.-In extremely conservative' I think n. vtarrteghi inevitauty produceda result which was charpy value for use in his of 2}ohin "ul".riaiio.r, produce wasiuch as gave ihe pinions an ability to withstand a margin iv) Even the result Dr Manteghi did finally (t o:e Kips againstI 300 Kips) for a crack I '5mm in Arbroatn excessof any loading (paragraph3 l0) likely to f" "*p".i"rrced at ProfessorMiller's comparable in depthDr Mant"ghi', irg; rormaximum safeloadingwas 1992Kips' depth.For a crack lmm 'U'factor and aileast 2410 and 2951 Kips if a'u' factor is inany figures are 1g31 (l.5mm) andzz43(1mm) Kip-s-without cluded. Metallurgy betweenthem' Essentiallythey of somemeasure agreement The respectiveexpertswere Dr Beardsleyand Dr Slater.There was and were initiated sub-surface'They were agreedthat the were agreedthat the actual failures were the result ofreverse loading It was agreedthat the louest averagetoughness pinions rvere shown to have lower ductility rhan LeTourneau had expccted. that E6 failed only when overloadedbeyond its design found was on E6 and near the point offailure. But there is no dispute rating and not at a surfaceflaw'

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Although she acknowledgedthat to an extent her conclusionstook into accountthe views of Dr Manteghi and Dr Rudlin, Dr Beardsleyconcludedher fust report with the statement: ..I do not believe the pinions remaining on Gorilla V to be suitable for North Sea service as a consequence both the poor of and magnitudesofloadings. Thesefactors the uncertain sources properties,the likely pr".ence ofsignificant imperfectionsand individually and in combination mean that their integrity cannot be relied upon". to In her Supplementalreport this opinion appeared be somewhatsoftened:"From a metallurgical viewpoint, I believethat the informati,onregarding ih" ptop".ti"s and quality of the remaining pinions availableat January 1999 meant that they could not be considerediuitable for-service without further evaluation ...." But in evidencefh Beardsleymade clear that her opinion remained that she would not have any confidence that the pinions were fit for their purpose nor that further failures would not occur. Essentiallythat opinion was founded on what shedescribedas "the remarkablylow Charpy values" and susceptibilityto imperfectionswhilst acknowledgingthat she(unlike the fracture mechanicsexperts)was unableto quantify the effect of those values.Impact loading, Dr Beardsley agreedin evidence,was not a concernin practice. I should recordthat in my judgment this view is one of such an extreme nature(more extremeeventhan any other of Amoco's experts)that it causesme seriousconcern not about Dr Beardsley'sobjectivity or expertise(which were apparent)but as to the application ofthat expertise to objectively establishedfacts. Dr Beardsley did acknowledgethat her opinion, although exa pi"ssea in broad termi, was limited to a metallurgicalviewpoint. NonethelessI think it represents reaction to and academic ofthe reality ofthe risk overstatement unsustainable analysisofthe urdoubted low toughnessand ductility figures leading to an addressed. When subjectedto analysisDr Beardsley'sconcernswere two related points: the "remarkably low" ductility and the variabiliry of the propertiesof the pinions comparedto the PSC specification. But it was agreedthat if castingsof the size of the pinions failed they will always fail in a brittle manner.Whetherthe propertiesDr Beardsleywas concernedabout would contributeto a failure in the senseof causea pinion to fail below its rated value is, as she acknowledged,dependenton the existenceofa surfacedefector imperfection in the pinion of a critical sizeto initiate a brittle fracture.That, and the likelihood of sucha defect is, surviving pSC's inspection processes, as she also acknowledged,a matter for the fracture mechanicsand MPVPOD experts. And if the evidenceof those experts showedthat no critically sized defect was presentthen the metallurgical issue was only tensile strengthwhich, it is agreed,they had. All the calculationsoftensile strengthshow that whetherthe pinions had adequate that there would be no concerns the specification was in fact exceeded.Dr Beardsleyexpressly agreed in cross-examination about low toughnessand ductility "ifyou know there are no critical defectsthere". Thus her opinions were far more dependent on those of other experts and the conditions likely to be found in the North Sea than at times she appearedpreparedto acknowledge.She acceped that what she meant by sayingthat she could not be confidentthat there would not be anotherpinion failure was that shecould not be 100 percentcertainno such failure would occur.That is a criterion which doesnot accordwith of ALARP. Nor, on the evidence,did any pinion ever fail below design loading because a surface(or any other) imperfection. that Dr Beardsleyhad misread and so overstatedthe, in any It also becameapparentin the course of her cross-examination event very limited, evidencethat there were any surfaceflaws on the pinionsDr Slaterconsideredthat'the conceptof ductility on a large component" like the pinions "really doesnot meanvery much"' He pointed out that while the LeTourneau specificationreferredto Charpy values,in fact (and as was commonpracticeat the time) no fracturemechanicsanalysishad been used in the desigrrofthe pinions and thus the specifiedvalues were not relatedto any such analysis.Manufacturers rely on the testing they carry out. The Charpy values are to ensurethat good heat treatmentis testingtechniquessuchasMPI to detectany flaws in the carried out. In the sameway the manufacturerrelies on non-destructive material. Whilst agreeingthat the Charpy values in the LAW Reports were low he said they "must not be consideredin the abstract.The data must basically be consideredin the availableuniverseof information aboutthesepinions". That makesvery good senseand in my judgment it is ;omething Amoco's experts(with the exceptionto someextentof Mr Trickey) failed to do or at leastdemonstrate.

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on Dr Slater acceptedthat the test block or coupon resultsfor ductility and Charpy values did not reflect the resultsobrtained indeed that there was no clear correlation betweenthe test testing the pinions themselves(which were consistentlylow) and block values and the values on a pinion. But what the test block values were showing was that if they were achieved(as they were) the strength data on the pinions was in excessof specification. When Mr Unwin put to him Amoco's casethat the four pinion failures coupled with the low values made it appropriateto investigate or evaluatethe pinions further Dr Slater disagreed.He said: "The only information that is available is that we have somefracturedpinions, we cannotfind any flaws on the fracturesurface. is We know that thesepinions have basically been reverseloaded.We know that the availableload under those circumstances is that thesepinions faited under large overload, and the properties ... huge. Thereforethe obvious and reasonableassessment of the material, as far as fracture toughnessinteractingwith flaws, was not an issue.You also then go to the varioustest stand data,where we have preciselythe sametype of Charpy values from the test standpinions as we have from the pinions that have fracturedand again we find that thesepinions haveperformed- I hateto say it - but flawlessly. So under thosecircumstances it would seemto me that the information that you haveto make a decision is preciselythe oppositeof what you aretrying to put forward. In other words there is no information to show that you should be going into a flaw-basedevaluation,but ratherthat all the information you have is that aside from this aspectthat the Charpy values are lower than the specifiedminima, everythingelse basically tells you that there is not a problem with these pinions; that what we have here are some one-off failures that have situation nothing to do with the way that thesepinions are going to be used in service .... I think that is an entirely reasonable that they would say "These pinions are fine". Mr Certainly he was not in any way shakenin cross-examination. Dr SlateCs opinion was in my judgment really unanswerable. Bowes' evidenceto the sameeffect was equally impressive,adding that the inspectionthresholdfor flaw sizesby PSC was for such a very small size that low ductility was of no concernat all.Magnetic Particle lnspection In the event,Dr Rudlin was the only expert to give evidenceon the methodologyand reliability of MPI as such.But the criterion was basedon Probability of Detection Curves. ln that expertisethe contest of "reliability" and the approachto its assessment Wall. Again, in my judgment, the evidence and opinions of Dr Wall were very much to be was between Dr Rudlin and Dr preferred.He was restrained,objective and most impressive.His report convincingly demolishedmuch of Dr Rudlin'sanalysis. It was Dr Rudlin's conclusion that only surface breaking flaws in the % pitch pinions of l.5mm depth or greaterwould be reliably detectedby MPI. Dr Wall believed flaws of a depth of 0.5 to lmm and lenglh of 1.5to 3mm would be reliably detected. probability of detectionat 95Voconfidencelevel". The criterion addressed both experts for "reliable" detectionwas "90%o by chance That meansmore than 90 out of 100 flaws of a given dimension are detected95% ofthe time or such a flaw has a90o/o of being detected.It is, Dr Wall said, a very conservativeapproach.The practical problem with the methodology is that it the requires at least 29 flaws per size group to give statisticalconfidencebecause criterion is met (as a matter of arithmetic) on and through the evidenceof Dr Wall I think the lack of detection of 29 out of 29 defectsor 45 out of 46. In cross-examination data and the resulting arbitrary nature of some of Dr Rudlin's calculations was readily exposed.For example, Dr Rudlin's deployment of the data dictated an answer in excessof lmm. He could not sustainhis position that repetition of MPI made no statistical difference. Commonsensesuggestedand Dr Wall explained otherwise.The relevant intemational standards(both American and British) refer to flaws with major dimensionsof 1116inch or l.58mm (paragraph241). k is not in issuethat this is or includes a referenceto the length ofthe flaw and not to depth (an MPI operatoris unlikely to be able to seethe depth ofa flaw). Nor is it in issuethat the aspectratio of depth to length for sucha flaw is at least I to 2 if not I to 5 (which was Dr Rudlin's figure). Thus the depth of a flaw of 1.5mm in length would be 0.75mm or less.Equally a flaw of a depth of l.5mm would have a length of 3 to 7.5mm. Yet the standards(basedon many years of experience)assumeand the evidenceis that flaws of much less than those dimensionscan be reliably detectedby MPI. Nor is it in issuethat the shapeof the pinions makesan MPI inspection easy and that the PSC (Mr Costa) inspection was done to a very high standardby a highly trained and experienced 25 employee(Paragraphs 4 and 25 5). of Dr Wall rvas understandably concernedto stressthat he beliered it was appropriateto give a range of f;gures because the

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was Mr unwin he said he certainly believed the relevant depth sensitivities and uncertaintiesinvolved. But when askedby when pressedby Mr Siberry' he said In re-examination, below lmm but to go significantly below 0.5mm would be difficult. that the key benefit of repeatinspection .owecould reasonably do*oio a level of 0.6 to 0.7mm" and having demonstrated "o--" small defect sizeseven below that level. was in the detectionof very that the conclusionsof Dr preferred.It follows, of courseo I am quite satisfied on the evidencethat Dr wall's figures are to !e and produceda result which in any event considerably Manteghi,s fiacture mechanicscalculationsproceedJ on a false basis applied even Dr tf* pi"i""s. Indeed if Dr Wall's upper figure of lmm was under-estimatedthe load-bearing capacity "f their specifiedload ratings [paragraphs 22.5and321(iv)] albeit with only a l0%o Manteghi,scalculationsshow the pinions met foiArbroath (paragraph3l0)'Marine operations safety margin and those ratings were much greaterthan the loads calculated Captain MT--A M:1": Warranty Surveyor is there for There was a fair measureof agreementbetween Captain Mallett 11! and operabilityofthejacking systembefore approving the loss preventionand reportsto irrd".*rit".s. He will assess condition can operate on the proposedlocation and withstand the environmental any rig move and it is his duty to certifu that ttre rig there was pinion failure did not place the rig at risk because forces imposed upon it. The two experts*"." ugr""i that the fz the rreather deteriorated'The only jacking at Halley North before ample time to cut away the damagedpinion arft resume would be if the jacking systemwas which the rig o.Ih" Arbrouth platform -ight h"y" been placed at risk circumstancesin be betweenfloating (when it could if necessary mo^de immobilised while the rig was alongsidethe plat'form in the iransitional detewave height and the weather and sea conditions moved clear by the use of the moorings and tugs) and elevation above riorated rapidlY. no metallurgical or engineeringdoubt about At full elevationthe risk ofjacking systemfailure would be insignificant assuming utty titk would only arise if the weatherwindow its capacity. Even in the caseof immobilisation autlng the tranlitional_stage *".t to shortenunexpectedly' weather forecastsfor required before any move alongside the platform *J,la u" permitted the accuracyofthe last day ofa 3 day forecast periods longer than 24 hours should be treatedwith caution and confidence in would at best be moderate. ofthe not be consideredsignificant" "awareness The expertswere also agreedthat whilst..taken alone" the failure of F7 "might attemptingto install the rig at Arbroath"' If the explaprevious failures *oulJharre createda need ro. un e*planation before that the would be sought.They also agreed nation involved engineeringor metallurgical issuesthen ttrey agreedsuitableadvice a last resort' where would only be adoptedas system was powerful enough to jack through an obstruction but suctr a course Marine WarrantySurveyor *n-ett e.it e information availableon 19 January 1999would have causeda they disagreedwas asto investigation' to wittrtro-taapproval for the move to the Arbroath platform without further to be told of the earlier pinion failures which Captain Mallett,s thesis was that on the failure of F7 he would have expected samesort as hasbeencarriedout for of would havetriggered an investigation,including a metallurgical-investigation, muchthe 'there w=as higher than usualrisk that the jacking systemmight fail"' a it this trial. That was because was his opinion ttat surprising frequency of the failures' the This opinion was basedsubstantially on what captainMallett_consideredto bethe "doubtful material quality" said to have been exposedby the LAW failure to ascribe them to clearly iaentinea causesand the different from operationalfailures' nor that Lereports. He would not acceptthat commissioning failures on a new.rig were would be sufiicient to satisfu a Warranty Tourneau,sview that the failures were by ,"rr"rrl" overloading and the pinions safe concerned.Nor that Captain Pique, who was of Surveyor. Nor that ADC were satisfied. Nor that Amoco were not unduly afprove the final move to Arbroath without further course on board when F7 failed, said he would have been preparedto present)and May' investigation or testing. I prefer the views of CaptainsPique (and otherswho were the leg was being lowered (not lifting the weight Captain May said that the explanationfor the F7 failure, which occurredwhen earlier failures r'ere in the commissioningphase; if he had learnt of a of the hull), had to be a gearbox or brake failure; the takenthe opportunity to inspectthe systemat metallurgical investigationhe would have sought advice about it. He would have ..pop,,the brakes and-testthe electrical circuits. That would in any event be done before anyjacking' Halley North; you could

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possiblyrunning on low oil levels, he would questionthe crew and perhapsseek If CaptainMay had heardabout the gearboxes Rowan. only if that did not satisfr him would he tum to his engineering department, in from LeToumeau or furthir assurances effect seekingthe advice of a Mr Trickey or a Mr Stone. As Captain May pointed out not only was the rig jacked up at Halley North after the two teeth of F7 were burnt off, but before arriving at the Aibroath platform ttre RGV would again be jacked down at Halley North, and jacked up again at the standby location. That, il ur.*iog as I think it would have been,it had been carried out without a problem, would have given Captain jacking up the May considerableadditional confidencein the systemand he said he would certainly have given his approvalto The positioning operationwould normally be expectedto be completedin l8 rig alongsidethe platform in thosecircumstances. to 24 hours from the stand-by position. Full preloading would, itsell on the evidence,take some l8 hours' Regular weather updateswould be obtained and monitored. Forecastsare available 24 hours a day. If the weather was to deteriorateor be forecastto do so there are stagesat which the operationcan be aborted.The approachtakes some3 hours. The legs arejacked down beforepreload begins.Pieload can also bedumped andthe rig jacked down. Full preloadmay not in any event be required for the expeciedconditions. Indeed at Arbroath even for a once-in-50-yearstorm only some 55 to 60ohpreload is requiredto ride out the storm. The existing and forecastweatherconditions required for positioning next to a platform require winds less rhan20 knots, seasof5 feet or less and no significant swell. These are "better" than required forjacking at a stand-byor other location such as Halley North: Paragraph285. waming If There are also other safeguards. there is a gearboxfailure or brake sticking it is likely to causean over-amperage There in December2000 in Canada. light to come on. It did before the smoking on 88 andthe failure of F7 and on the occasion may not havebeencalibratedat the time they failed. I do the is uncertaintyabout E3 and E6, but the evidencesuggests devices think by January 1999 the evidenceis that a warning would probably have been given. The motor and brakeheadcan be disengagedto allow a % pinion to freewheel (possibly even if it is damaged).That takes about an hour. The procedurewas estaUtisireafo[owing the F7 failure itself. The gearboxcan readily be isolated from the geartrain by cutting out a numberof the small teeth on the bne pitch pinion. That also takes about an hour. To cut out a tooth on a la pitch pinion takes about 4 hours. That would only be necessaryif it wasjammed. Otherwise it could be left to freewheel.tn the last resort a controlledjacking through could be attemptedbut as Mr Quinn, Mr Trickey and Mr Stonesaid the otheravailableoptionsmeantthere would be no needto consider it. It is very difficult to imagine how with all these possibilities the weathercould deteriorateso rapidly and unexpectedlyto give rise to a problem. In refusing to accept them, I think Captain Mallett was carrying theorising and improlibitity beyondthe limits to which it can reasonablybe taken. His view was an extremeone,particularly so in the contextof my other findings, and one which I think would not have been and was not in fact adoptedby anyoneconcemedat the time. was the likely waiting on weathertime which could arise The other issue which Captain Mallett and Captain May addressed from delivery of the rig in Decemberratherthan October. It is convenientto commenton the issuehere,but the questionis only of real relevanceif there was (which I have held there was not) a contractual obligation to mobilise the rig for delivery in of October or possibly if (which it would not have done: paragraph145)Amoco would havetakenadvantage an earlierweather window had the rig arrived in Rotterdamfully preparedto drill. It is agreedthat weatherconditions in the North Seagenerally tum for the worse from mid-september. The weather is also generally at its worst in Decemberand January.But it became that despitethe terms of CaptainMallett's report there were in fact no suitable apparentin the courseof his cross-examination weather windows in October 1998 in which it would have been acceptableto seekto position the RGV at Arbroath. If the rig had been ready to leave Rotterdam on 15 October 1998 (the end of the "anticipated" arrival window) it would have been 29 to daysbefore the move could in fact have begun. CaptainMallett's criterion for the final approach Arbroath was a full 24 hour forecast (Captain May preferred 36 hours). Captain Mallett acceptedthat there was a suitable weatherwindow for the final approachbetween9 and 12 Januarywhich the RGV could have usedhad it beenableto leave Rotterdamin time to do so early on 8 January and it was agreed that provided the rig had been ready to leave Rotterdamno later than early morning of 16 Decemberit could have done so albeit it would still have had to wait for 9 Januarybefore it could finally move to the platform as the weather would only have allowed it to reach the standby location. There is also a disputebetweenCaptain Mallett and would in fact have allowed the Captain NIay as to whether if the contract commencedon 25 Decenrberthe weatherconCitions RGV to leave Rotterdamin time to take advantageof the weather window between9 and 12 January.Captain Mallett believed they were such that the rig could only have begun the move at about midnight on 8 Januarywhich would have allowed time

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platform. captain May-had.much greater experienceof rig possibly to get to the stand-by location ,!rt yt alongsidethe months his evidence ttrat the usual waiting time in the winter movements from Rotterdam and in the North sea. Ii was weatherconditions a rig move. It.was also his evidencethat the actual (mid-october to mid-March) was 2-3 weeksto "o*ft","o., z JJnuary and any time after I 800 on 8 January' I think, because toif, -hours would have allowed the RGV to leave Rotterduin Rotteiam and the conditions in which it would be safeto of his greaterknowledge (in particular of where the RGV was and the RGV would take a little is to be preferred.Arbroath is some 350 miles from Ro$erdam leave) CaptainMay',s "rria"n"" The weather conditions were such that departure on 7 January would have left sufficient time to less than 60 hours to get ihere. would only have enabledthe rig to reachthe go alongsidethe platform. Departure ut orcttortty uter 180! hours-on8 January .ihus haveresultedin lesswaiting the actualweatherconditionsin 1998 and 1999would probably standbylocation at Arbroath. place on 25 Decemberthe waiting and if delivery took on weather time for an arrival in mid-December than in mid-october the actualweather conditions at the probably only have been some r: auyr. nt itte very best for Amoco, therefore, time would loss or was of significance'Overview casethat delay causedit any time do not assistthe "o*p"rry', Systemwere engineersexperiencedin offshore an The expertswho expressed overview ofthe issuesrelating to the Jacking were impressive and knowledgeablewitnesses' units andjacking systems.Both, Mr Tiickey and Mr Stone, occur from a mis-wired motor, failure of a They agreedthat Bg, E3, E6and F7 all failed when reverseloaded such as could the gear train. They also agreedthat the metallurgical propertiesof in brake to releaseor failure ofany signifi"un "o*fon"nt they.differed was in the need for and of the pinions would be relevantto aslessingthe fitness for purpo-se the pinions. where the low,oil levels found in the No 6 geardegreeof investigation required by the low toughnessand ductility of the pinions, ofthe brakesand the damagefound on one occasionto the H chord on geartrain, the c-ondition boxes,the leaksin the secondary which requiredinvestigationbut Mr a rack. In generalterms Mr Trickey consideredthosemattersgave rise to seriousconcerns Stone did not. in reaching some of the Inevitably and reasonably,Mr Trickey relied on the views of Drs Beardsley' Manteghi and Rudlin relying on the latest reports of those experts,Mr Trickey took Dr conclusions he did. In his iast report, dated2 April 2001, Allowing a suitablemargin his Manteghi,sfigure of 1636 Kips as the assumedload at which the finio.tr were at risk of failure. namely 1309 Kips. on the basisthat opinion was that the maximum allowable load should be de-ratedto 80% of that figure to be 1300 Kips (Mr Hogg's LeTourneau had calculatedthe maximum pinion loads at Arbroath with StormloKs engaged the requirementshe consideredappropriatebefore figure is of courselower) Mr Trickey then ievised his earlier reports as to were (or, so far as material, included): iaitcing the RGV at the Arbroath plaiform. Those requirements Manteghi or figures suffrby i) A completemetallurgical investigation sufficient to achievethe figures presented Dr at Arbroath. -""t th" requirementsfor operations cient to show that the pinions "ould ii) An investigationinto w'hy F7 failed. iii; e visual a:ndMpI inspectionof the roots of the rack on chord F in the areawhere F7 failed. cleanedand reset". ivj *ntt brakesto be opened,examined and where necessary' v) Inspectionofall primary gearboxesnot previously inspected' the side of rack H in orderto checkthey were not oi; open;.,g of secondary le-utt.ainsfor inspectionon 88, 83, E6 and F7 and damaged. yzpitchpinions to investigateoil leaks,sealdamage,shaft play and hub vii) Survey (as Mr Mobbs did in February lggg) of the 301 wear (paragraphs to 302). viii) Tlsting the StormLOKs and ensuringthe crew understoodhow to fit them' ix) Replacementof F7 and repair of any damagefound to the primary^gearboxes. pinion followed by a preload *ip"*or-u1ce of a jack-up tlst by unienakin-g a jacking cycie of 50ftwith a load of 593 Kips a jacking test raisingthe hull by l0flwith a load Jquivatentto tzoo Kips per pinion andthen loweringthe hull with a load of 1300 the ri-e). kipr p!. pinion (tlhedifference is becauseof a different friction value betweenlifting and lowering be requiredto move It was Mr Trickey's estimatethat granted availability of equipmentand personneland whatevertime might 6 weeks from the time that the the rig to Dundeeand to agreethe-scopeof work, those requirementswould take approximately work was put in hand.

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that he believedthat the RGV would probably have passedhis jack-up test.He also of Mr Trickey agreedin cross-examination question that if Drs Beardsley,Manteghi and Rudlin were wrong then his figures would have to be course ugr""J without re-calculated and that his view that the RGV's loading capacity had to be de-ratedwas dependanton their views. By way of illustration, if the minimum reliably detectabledepth of crack size was changedto 0.75mm (not Dr Rudlin's 1.5mm)but othThe erwise Drs Beardsley and Mantegiri were right the failure load of a pinion would be 2314 Kips or I 85 1 Kips at 80%. 1992Kips and i594 Kips at 80% [paragraph321(iv)]. If, of course,Professor comparablefigure for a crack of l-mm depth are Miller's calculationswere usedthe answerwould be even more favourableto BAO' Mr In cross-examination, Trickey accepted,as again he had to as his evidence followed much of the metallurgical evidence, that it was ..very unlikely''the faiiure oigA hua anything to do with the propertiesof the pinion. He also agreedthat E3 and E6 that probably all three(and failed when overloadedin the senseofloaded abovedesign.The logic ofthose opinions is, as stated, specified and their Charpy values had no certainly E3 and E6) pinions in fact performed better in loading strengthterms than effect on their performance. The F7 failure, Mr Trickey agreed,was causedeither by a locked or draggingbrake or a faulty gearbox.The gearboxwas found to be locked after the eventbut that could have been either an effect ofthe failure or its cause.He also agreedthat ifthe torque did not spin out on releaseof the brake then a brake defect was the cause.Again it follows, as ProfessorMiller said, that the causeof ihe pinion failure was in all probability that it was overloaded.Although Mr Trickey was reluctantto acceptit I think it follows that there was no basis at all in any of the four failures for thinking that there was any problem with the material properties of the pinions. If anything, the reversewas true. Indeed if it had not been for the LAW reports I doubt if Amoco or this court would ever haveheard about the metallurgical issues.The thrust of Mr Trickey's evidenceon those issueswas that he would have beenconcernedonce he was aware of the low Charpy values (especiallyon E6) on the failed pinions, which were lower than the design criterion (albeit that related to the couponsall of which were within specification).That he said would have "horrified" him and led him to seekthe advice ofan outside expert. that he should have referred in his reports to the degreeof comfort or confidencewhich could be Mr Trickey fairly accepted derived from thejacking operationsin Sabineand was also unawareevenwhen he gave evidenceofthe "satisfactory"report by ADC on the jacking system(paragraph294). to When askedwhether he now acceptedthat, even on his analysis,it would be reasonable ignore metallurgical investigation and go straightto his preloadtest Mr Trickey still thought not as he would need some guidanceon the maximum limit to which he could test. But that, as stated,was dependenton the views of Drs Beardsley,Manteghi and Rudlin which I have rejected. shortly. The other matterson which Mr Trickey relied (Paragraph346) canbe addressed Item (ii) The reasonfor the failure of F7 was, on the evidence,a brake defect which could have been avoided if Mr Quinn had been told that the torque did not spin out when the brakes were "released" (see Paragraph283). The existing information at 19 Januaryreadily justified that conclusion. Item (iii)MPI inspectionof F chord. There was no evidenceof any rack damagecausedby any of the pinion failures.They were the each inspectedat the time. Mr Stonesaid an MPI inspectionwould only be required if a visual inspectionsuggested rack had been damaged.In any event Mr Trickey agreedsuch an inspectionwould only take about an hour. Item (iv)Brakes The evidenceof brake failures is to be found only in Mr Yoder's report in November 1998(paragraph276) and the circumstances the F7 pinion failure (paragraphs283 to284). That is a very thin basisfor Mr Trickey's opinion. Mr Stone of said that the brake failure rate was a reasonableone "and almostto be expected"bearing in mind how hard the brakeshad been worked during the legging-up process.The basic design was no different from the 375 Kip units which had an established successfulperformancerecord. It is also a standardroutine to "pop" the brakesto test them before anyjacking. In any eventto and the magneticrings collapsedtogether.A megger check the brakeswould oniy involve seeingthat the coil was undamaged prove the electrical circuits and establishthat the coils and motors were good. Only if there was a low test on each leg would to reading would it be necessary inspect fuither.

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delivered the rig to were changedout before T,eTourneau Item (v) (See paragraphs 266to 267).Only 2 primary gearboxes were making a loud noise during jacking' There is someevidence Rowan, E5 and E7, both of which were replacedo""uor"itr"y b"utings, blown sealsor debris insidethem' Mr both were affectedby lack of lubrication. Gearscould also fail becauseoibud sai$ have been found with low oil levels could have been t*rbo*"" Trickey fairly acceptedthat Mr Rimlinger's litt ;itt 1o He also agreedthat low levels could havebeenthe substantially overstateddue to a misundirstanding astJthe correct-oillevel. by the problem would have been addressed the result of leaking output pinion seals,and, proviied it was done thoroughly, jacking operation' Mr Trickey was not preparedto acceptthat check on oil levels which was carried out at Sabinebefore every or all the gearboxes low oil levels (seeParagraph26Siwas sufficient to avoid the needto inspect the responseto the supposed basedon his opinion to In part that seemed be to at least a sufficient number (50%o) satis! the inspectorthere was no problem. evidence)'Again all the have been causeduy u gluruo* problem lwhich I think most unlikely on the that the F7 failure could is no dispute that they were regularly topped up' riid-octoter from when there gearboxes had worked without a problem "ft"r in that time and indeed almost at once' Mr Stone said, and I accept,that iithere had been a problem it would have been manifest .'legginj up" hu, already been stated. whilst Mr Trickey is no doubt right that a The extent of the jacking involved in the make a discemible noise to give gearbox may deteriorategadually the evidence a'isqis that in such a case it will usually warning. This was an instancein which I think Mr stone was warning before it does fail. It may also causean over-amperage anJsufficient and Mr Trickey failed to satisfyme that his responseat the time was appro=priate plainly right that LeTourneau's one. approachwas a reasonable pinion failures' As The evidenceshowsthat 88, E3, E6 and F7 were inspectedat the time of the Item (vi)SecondaryGearboxes light of Mr Dowdy's unwalk to the river, in the to the evidence of damagefound to an H rack tooth in June 1998 during the which included egs tttut it was so minor as not to require repair and the *u, decidedin discussions challengedevidencethuiit requirements jacking I found Mr Trickey's continuing reluctancecompletely to accepthe should deleteit from his subsequent -fhe in cross-examination' pursuedwith Mr Stone point was rightly not unfortunate. "'t "n have beencarried out before and not after Item (vii)% pitch pinions Mr Trickey's point was that Mr Mobbs investigationshould one ADC did not follow it, Amoco did not ask the rig went to Arbroath. Whilst I acceptMr Trickey's approachas a reasonable which required urgentattentionat the time or which createdany for it and I also acceptthat it was rightly not seentoie a-matter "in an ideal situation" LeToumeau risks to going on location or to th; ojerational capacity of the rig. Mr Stone agreedthat oil was always topped up beforejacking and no secondary detive.y of ttre rig but G would have dealt with the problem be^fore would only occur after a gear train ever failed. Even the worst wear ,"poi"d by Mr Mobbs-(5/8 inch) was such that a failure futtft". inch of wear. Mr Mobbs inspectionwas completedin one day' acknowledgedthat: see (viii)StormlOKs Mr Massey said, and I accept, tirat th9 Storml_Ofk were commissioned; ADC The evidenceis that instrucparagraph 271(ii). ABS witnessedit and were satisfied.The StormLOKS were not complicatedcrew to practicefitting them and that tions for their usewere presenton board. It would take at most two to three hours for the could have been done at any location. redundancyin the system' As Mr Stone in (ix) Replacementof F7 *ui, on the evidence,unnecessary view of the considerable said, it could simply be taken off line. on the metallurgical investigation Mr Trickey,s estimateof how long it would take to carry out his requirementswas based the work could item which might take up to 6 weeis and the^priloadtest would then follow' The rest of being the critical path that the estimatefor the acknowledged be done at the sametime and "could piobably bL do.r" in a couple of weeks". Mr Trickey such as the one he had done metallurgical investigation was a matter better left to others. Dr Manteghi thought an-analysis testswould take 6 weeks (the sourceof Mr Trickey's fracture toughness would take some2yzto 3 weeksbut actual destructive ProfessorMiller thought 12' 24 estimate). Mr Bowes said fracture toughnesstests could have been done in about2Yzweeks; hour days. beforejacking.up proceededat Arbroath' He also Mr Stone did not considerany of Mr Trickey's requirementswere necessary the weight ofthe hull (that to said that if it had beenthoughtnecessary test t#pinions it could have beendone in stagesby using time which would have involved lifting is without or with only ver! little preload) and testing half the pinions on each leg at a could be riet uy the ability to engagethe other half of the pinions at the push of a loads of 1200 Kips. Any safety "bn""-, button. That he said coujd be done without going iirto a safeharbour anCwould take some 5 to 7 days. opinion (acceptingthat he too would have left any metallurgical issuesto the advice of others)was The basis of Mr Stone's thal

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'lretty much explained" and not that unusualfor a shipyardthat had he consideredthe three pinion failures at Sabinepasswere that beenmothballed for somethree yearswhere the labour force was dealing with the first opposedgeartrain. It was his belief g,8 was causedby mis-wiring uttd to E3 and E6 or it was causedby a brake failure but one which was the sameapplied "ith"t momentary as it only lasted fL part of a rotation damaging one tooth and nothing else. A pinion takes 3.78 minutes to complete the a rotation. Bg, he thought was nb mystery. It ultimately failed because brake was re-setwithout being wired up again,hence not the torque was heard 6y Mr Snow io rpin out when the brake was released, and, without power' the warning light would had to be human error. Mis-wirings would infunction. The key point for Mr Stonewas that the explanationfor each failure and evitably ceaseto be a problem as they would becomi apparenton first operation. The brakesrverevery simple devices proved- "poppingl' them as a long esiat[shed routine every time before jacking. As for F7 Mr Stone said by again would be simething plainly was dragging und h" explainedhow it was that with the rig lowering the leg the motor should be "regenergo the ating', and ih" oro".-u-p"*g" tigtrt would not come on until in effect whatever is causingit to drag also causes motor to could result (as happened on the evidence) in the to forward power levil and to exceed the over-current level. That over-amperagewaming light operating only at the last stage.But his opinion was that the immediate causeof failure was that the brake was releasedand becauseno one informed Mr Quinn that when they thought human error in not then "**ing they had releasedit the torque had not spun out. He also saidthat on examinationofthe brake,provided the coils are intact, it is -of it dragging would be revealed.A coil failure would causethe earth warning signal to operate, imirobable that the "uut" which it did not. In his opinion there was nothing in the history of events,leaving aside only metallurgical issues,which indicated a need for any lacting test as he did not ihi.rk th"t" should have been any question with regardto the strengthofthe pinions.OperatorIssues and prudent Opwas to report on the approachthat a reasonable The expert role of Mr Bartle and Mr Possin the proceedings erator of a rig would have taken given the condition of the RGV at 19 January 1999. on To a very great extentthereforetheir opinions were dependant the other evidenceboth factual and,particularly in the caseof Mr Bartle , expert. The very limited measure of agreement between them and their divergent views are apparent from a Joint Memorandum dated whetherthere was any risk of immobilisation of the systembut 18 January200 1. As regardsthe Jacking Systemthey disagreed agreedthat ifthat potential reasonablyexisted then they would have sought specialist advice. They agreedthat the response '1vasinadequate Amoco to make for from BAO in the fax letter dated l8 January(Paragraph168)regardingthe pinion failures Arbroath platform". Mr Possaddedthat it was his an informed decision regarding the safety ofjacking the rig alongsidethe and not as a reaopinion that "Amoco's move to terminate without further investigation of the matter was wholly inadequate would have done." sonableoperator of The essenceof the different view on the totality of the issueswas capturedin the last two paragraphs the Joint Memorandum: the Mr Possbelievedthat the IRGV] *ourd ^urr" beensufficientlyreadyon | 9 Januaryto move alongside Arbroathplatform and for operationsto commence. Mr Bartle continued to believe that the operability and safety of the jacking system and the well control system were questionable and the rig floor equipmenthad not beencompletelycommissionedat contracttermination.He believedthat the option ofmanual operation was unacceptablefor both operationaland safetyreasons". Whilst the expert role which he was fulfilling may to someextent accountfor it, in the courseof his evidenceMr Bartle was, I think, frequently preparedto act more as advocatethan expert. He also appearedto have difficulty in discounting complaints the and in appreciatingthat he was addressing conductofa reasonable aboutthe rig floor equipmentwhich had been abandoned the who was seekinggrounds to terminateor re-negotiate contract. the operatorwhich was not necessarily sameas an operator and Mr I regretto say that I found much ofhis evidencetendentiousand unbalanced. Poss,on the other hand,was both reasoned objective and quite willing to criticise BAO when he consideredit right to do so.

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of Mr Trickey' Dr Mr Bartle readily acknowledgedthat his views on the jacking system were largely based on the reports BAo's expert reports-He those views before reading any of Beardsley,Dr Manteghi and 6aptain Mallett. He had "ipr"s"d to said when he did readthose reportshe did not find it necessary changeany ofhis opinions. Mr Bartle's conclusion in his report was that: ..Due to the condition of the jacking system on 19 January,and the fact that insufficient information had been provided regarding the pinion failure, urrdthut no other information was forthcoming that other problems had beendealt with, I would not until I [ur,." upprouid the move of the drilling unit alongsidethe production platform. I would not have agreedto the rig move ll4 pitch pinions, were unlikely to re-occurandthis risk was as low as *us fuify confident that failures, in particular those of the reasonablypracticable. to in relianceon Mr Poss'agreement cross-examination this conclusionof Mr Bartle. However the Amoco placesconsiderable the two experts(as Mr Poss;evidencemade clear) was asto what would or shouldhavebeenrequiredto real difference between the confidence.-Mrposs (like Mr Stone)considered information availableat the time to be sufficienl Mr provide the necessary willingness (had the contractnot beenterminated)to bartle, like Mr Trickey did not. Amoco also submit that BAO's expressed provide information sirould be "viewed with the greatestscepticism". I do not agree.I seenothing in the history of eventsto on ,uppo.t a casethat BAO ever soughtto keep any information from Amoco (or ADC). Amoco and ADC had representatives the evJnts. Theii reports dernonstratethat they were aware of all material eventsand discussedthem Uoaia tne RGV throughout with Rowan/BAO. Mr McDonald had an entirely open and frank relationshipwith Amoco onshore.It is, as I have stated,in my which immediately precededtermination as supporting Amoco's judgment quite wrong to characterisethe correspondence case.To the contrary. of When questionedabout Mr Marcom's fax letter of l8 January(paragraphs168 and 289) Mr Bartle saidthat the essence the an operatorto make a decision "either way". compla-intabout its contentswas that it gave insufficient information to enable When challengedthat the logic of that responsehad to be to seekfurther information, which of courseAmoco did not do and olerator wouldhave done, Mr Bartle's first responsewas in effect to say that BAO appearedto be Mr poss said a reasonable shutting the door by denying there was any reason for concem, a matter of fact which derives no justification from the documents and which I ieject on ihe evidence.The reality, as I find it, was that the boot was on the other foot. Amoco shut the door and had no intention of seekingany further information. Amoco decidedthat day to terminate the contractand did so the next day without giving any real considerationto Mr Marcom's letter. Moreover there was no expressionof concem by those on board at the time, Mr Jones,Mr Price or ADC. The extent of Mr O'Brien's concemsare apparentfrom his reports (paragraphs lE9 to 194). Mr Bartle would not have been satisfied by LeTourneau'sreport to Rowan on 19 Januaryon the earlier failures the because precise (paragraphs291 to 292). He would not have been satisfiedwithout Mr Trickey's postulatedinvestigations causeofthe failures had not been identified. Mr poss said that most operatorswould not even know that a pinion had failed but agreedthe 12 Januaryfailure would cause concern in the context of the earlier failures and that Amoco was right and justified in seekingfurther information. He would have expectedthe concernto be raised orally at once (not by a letter dated2 days later) and he would haveexpectedto have seen all the information availableto LeTourneau.There should havebeena meetingto achieveajoint evaluationofany problem and to seekto satisfu an operatorit was safe to proceed.Whilst Mr Possdid not resile from his view that Mr Marcom's fax letter of lE January did not provide sufiicient information for an operatorto be satisfied, he did say the situation was not one which would normally give rise to letter writing. were taking place that Amoco was not in fact in the least I think it is quite apparentin the context in which the letter exchanges "an informed decision" about the jacking systembut was rather concemedto seekfurther information or interestedin making maintaining a caseon which it had embarkedbefore 12 Januaryon the basisthat the l5 Januarywas a key date for the operation of Clause 28 of the contract fparagraphs158(ii) and (iii)]. It would hardly be surprising if that was to affect the nature of any Even so. and despitethe views of both Mr Bartle and Mr Poss,I do not find the l8 Januaryletter either uninformative response.

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on or unhelpful and I unhesitatingly accept that Mr Marcom wrote what he genuinely believed to be the views of Rowan/BAO on of the pinion failuls. Thekey information (confirming "advises previously givenlo Amoco's representatives the causls the other to "a wiring fault'', and board',) was that the three failures at Sabine were in effect due to "overstress" (83 and E6) and The letter also to that the F7 failure was due to a brake fault for which a procedurehad beenestablished preventany recurrence. as load testedand certified. All those statements, I find, were accurate.The referred to thejacking systembeing satisfactorily Moreover the blind were noileading tire blind iriproviding this information as Amoco submitted in its closing submissions. substance the information was the sameas provided by LeTourneauto Rowan: paragraph290. LeToumeau'sopinion was to of be respected.Had Amoco been concernedto seek information it would have pursuedthe matter. Indeedit would have learnt that ADC and Mr O'Brien were content to proceed, assuming Amoco was not in fact aware of that at the time. The same was true of the Complex OIM (Mark Jones) and Captain Piqu6. There was also no basis or justification for assumingthat the 18 Januaryletter was or could reasonablybe taken to be BAO's last word on the matter. operatorsoughtfurther information it would havebeensatisfiedby Mr poss said that the probability was that had a reasonable justifiea as ne thought it was by all the testing ofthe systemand the explanationofthe pinion failures. Mr LeTourneau'sadvice poss ..seriouslydoubted" that anything more including any fracture mechanicsanalysiswould ever have beensoughtor done. On all the evidenceI have now heardl have no doubt at all he was right about that and I think there was more than sufficient information available at l9 Januaryfor the samejudgment to have been properly and soundly reachedthen, and a reasonable operator would have taken that view. In any evenf even any lingering doubts could and on my findings would have been readily by dispelled by any ofthe physical preloadtestssuggested the experts.Moreover if, as I think on the evidencewould have been the case.such a test would have been done in a shelteredarea(such as Dundee) it would still probably have beenachievedin time for the rig to meet a suitable weather window between 30 January and 2 February to retum to Arbroath and go to work.Conclusions Amoco's case on the facts fails. At 19 January, with a minimum of further enquiry, it would readily and rightly have been concluded that the jacking system met its specification and so and by definition was more than fit for use at Arbroath. The essentialinformation w* ihut th" fo,rr pinion failures were explainedby human error leadingto reverseoverloading,the system (brake binding) had more than proved itself and a procedure had been establishedto addressthe immediate circumstances which causedthe F7 failure. The metallurgical propertiesof the pinions were suchthat they were strongerbut more brittle than the values specified for the API test coupons.That should have been of no concern.BOPs/Well Control SystemDescription A very basic description of the well control equipment is to be found in Paragraphs15 to 17. The BOP Control System (or fluid, and disto Koomey Unit or Accumulator Unit), is desigrred provide hydraulic power generation,storageof pressurised system,together with a remote control capability tribution of the fluid to the various functions of the BOP stack and diverter from the driller's panel and the toolpusher's panel as well as from the control manifold itself. It provides a volume of fluid sufficient to perform the various operationson stored fluid only (i.e. without the pumps operating)so that the well can still be shut in even in the event of a loss of power. The key componentsof the entire systemand their componentor item (on a schematic)numbers,whererelevant,are asfollows: The Hydraulic Power Unit (" FPU ") Tank is a stainlesssteel hydraulic fluid reservoir tank containingthe volume of fluid (3600 litres) that is to be pressurised and stored.Connectedto the tank by short lengthsofpiping aretwo pumps(10.1 and 10.2) each of which is capablaof supplying enough fluid for the system.The pumps are fitted with stainlesssteelfilters on both the suction (between the tank u.td th" pumps) and discharge sides (ll.l and 11.2, l2.l and 12.2 respectively)and automatic The FIPUtank is pressureswitchesto stop and startthe pumps on use (very approximately)of about l0% ofthe storedpressure. the mezzaninedeck, some200 feet from the drilt floor. The filters on the dischargeside of the located in an equipmentroom on pumps (12.1 and \Z.ZSur" referredto as the main or inline filters. They were designedto removeevenvery fine material of 20 microns or more from the fluid (a micron is one millionth of a metre: the diameterof a hair is about 70 microns). The Accumulator Bank consistsof a bank of 56 54-litre cylindrical pressurestoragevessels(''accumulators")for the 3000 psi nitrogen gas fluid generatedby the HPU pumps. Cylindrical rubber bladdersin the accumulatorsare filled with pressurised the function is operated high pressurefluid When a which is compresseci the hydraulic fluid pumped into the accumttlators. by

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tank a few feet bladders.The accumulatorsare situatedin the sameequipmentroom asthe FIPU is forced out by the pressurised away from it. ..main control panel') distributesthe control fluid from the accumulators and pumps via The Hydraulic control manifold (or iloor close to the BOP stack)and on to the functions of the BOP and supply lines to the Valve Module (situatedunder the drill to the Valve Module also via other lines directly to the choke and kill valves and the valves on the diverter. The connections are in main deck above the control manifold and first terminate at the Deck Cluster . These connections come up througlr the long and having 5 90" turns.From the hard or:.shipbo*a,' piping. Thereare 53 lines ofhard piping eachbetween45 and 49 feet hosing nmning on Deck Cluster to the Valve Module and on to the various functions the connectionsare made by flexible the rig (known as'lhe catenary")-The hosingto the Valve Module is trolleys up and down the side of the cantilever section of to the valve Module. The auo.,i goo feet long. The control unit also provides hydrauliC command sigrals ("pilot" sigrrals) hydraulic fluid from the pressurised operation of a piloiline from the control ,rnit op"* (or closes)the chosenvalve so that supply line is directed to the relevantfunction. pressure operatethe to The 3000 psi available from the pumps and accumulatorscan and will usually be adjustedto a lower psi and for the annularpreventer500-1500 BOp stack and diverter system.Normal systempressureto the Ram BOPs is 1500 psi. The adjustment is -ade by regulators(32.i and 32.2 and 33.1,33.2 and 33.3). The regulatorsare themselvescontrolled manifold blocks (item 66 for the Annular and BoP stack and item 67 for the from the BOp control unit by IncrJase/decrease items 66 and 67 comesvia a 50 micron pilot in-line filter (item 15/16). diverter). The pilot supply for both line and the Item 66 containedtwo valves, one leading to the annular regulator (Item 32.1) and on to the main annularsupply applied the (Item 32.2j and on to the main supply line to the rams. Ilem 32.1 regulates pressure other to the manifold regulator the via the arinula,pieventer control line; item 32.2 regulates pressureapplied to the BOP ramsvia the control to the annular to regulatethe lines to eachpair of Rams. Betweenitem 6d and items 32J and3Z.2there arethrottle valves which can be used ..mini,, accumulatorbottles pre-chargedboth to provide immediatepressureand to control the impact of any sudden flow and (inincreasesin pressure.The throttle valves werJ items 62.1 and 62.2, the mini accumulatorswere item 40.1 for the annular 40.ZfortheBoPrams(intendedtobepre-setat55bar).25barisabout360psi'55bar at25bar)anditem tendedtobepre-set on is about 750 psi. The purposeof the throttle valves is somewhatuncertain.IndeedMr Ellis was not familiar with their use needfor them' He suggested such systems,said it was not easyto tell what position (or setting)they were in and did not seethe they were there just to fine tune the system.Mr Marymee thought they might be intended for useto avoid or control sudden increasesin pressure. item Item 67 leads to the regulatorsfor the diverter system.There are 3 regulators:item 33.I for the flowline oper/closevalve, 33.3 the regulatorfor the diverter packer itself. The configurationwas 33.2 for the overshot packer open/closevalve and item (items40.3,40.4and40.5) the sameas item 66. Therewerethrottlevalves(items 62.3,62.4and 62.5)and 3 mini-accumulators intendedto be pre-chargedrespectivelyto l0 bar, 10 bar and 20bartull The manifold regulator (32.2) systemcan be by-passedviathe manifold by-pass(item 73.1). If the by-passis in operation accumulatorpressurecan be applied directly to tlie selectedBOP function. The purposeis to enableinstant fulI pressureto be applied in an emergencyor as a fail-safe in the event of a fault with the manifold regulator. The functions which had dedicatedcontrol lines running to them direct from the Control Panelincludedthe Choke/I(ill valves, the Diverter SystemOverboardValve, Flowline Valve and the 4" Block Valve. Theselines were formed of %" steelpiping with to yo,,bore and terminated at the controlled function. The 4" Block valve itself is so situatedthat access it to hook it up to the riding belt or cradle to reachthe diverter housing. It was in fact not requiredat all for hosescan only be achievedby use ofa drilling at Arbroath. There was also a separatepilot line to operatethe ShearAssist by opening a valve (item 76). The purpose bank of accumulatorsto ensurethat the blind shearram of the ShearAssist is to guaranteesufficient pressurefrom a separate will shearany pipe in use.The Contract 59 35 The contractualprovisionson which Amoco relies are Clauses3.1. (paragraphs and 36):6.1.2(paragraphs and 60), and

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(Appendix A p 62) 62 6. 1 5 (paragraphs to 65) which itself refersto Appendix 6. The introduction to Appendix 6 to the Contract ..the well contri acceptancestandards'ito be used by Amoco "to determine if the Drilling Unit is acceptableto refers to It also refers to "additional checksthat will be made by Amoco well control equipment Amoco,, for the drilling prog*--". close out of all auditors,,and to the posiUiilty that the audit might be completed by independentspecialists"including the correctiveaction requestsraised from the audif'' found in section One feature of the various tests which are set out in Appendix 6 which needsto be highlighted here is to be ..Bops & Control SystemsFunction Tests" and requiresa function test to be conductedat normal 1500psi 19.0which refers to times will be operatingpressure.to record function times and fluid volumes for eachfunction, maximum permissibleresponse as per API RP 53-API RP 16e" (my underlining). .,ApI" standsfor the American petroleum lnstitute. *RP" is short for "RecommendedPractices".The Third Edition of API RP practicesfor BoP Equipment Systems.The First Edition of API RP l6E (oc53 setsout (at March 1997)the recommended to Practicesare expressed be practicesior designof well control systems.Recommended tober 1990)setsout the recommended .,guides"but they are also said to be "basedon extensiveand wide ranging industry experience",and to reflect "proven, sound engineeringand operatingpractices". 12.3.2and 12.3.3of API RP 53 providedthat: Paragraphs *12-3.2-

preBOp systemsshould have suffrcient usable hydraulic fluid volume (with pumps inoperative)to close one annular-type After closing position, and open one HCR valve againstzerowellbore pressureventer,all ram-type preventersfrom a full open one annularprevinter, all ram-type preventersand opening one HCR valve, the remainingpressureshall be 200 psi ' '. or more prechargepressure.(An HCR Valve is a choke or kill valve).12.3.3. abovethe minimum recommended Accumulator ResponseTime. ResponseTime between activation and complete operation of a-function is basedon BOP or valve closure andleal off. For surfaceinstallations,the BOP control systemshouldbe capableof closing eachram BoP within 30 seconds.Closing time should not exceed30 secondsfor annular BOPs smaller than 18% inches ... nominal bore and 45 time for choke and kill valves (either open or inchesnominal bore and larger. Response for seconds annular preventersof 183/+ close responsetime. Measurementof closing responsetime begins at close) should not exceedthe minimum observedram pushingthe button ... to operatethe function and endswhen the BOP or valve is closedeffecting a seal.A BOP is considered closedwhen the regulatedoperatingpressurehas recoveredto its nominal setting . '.." API RP l6E was in the sameterms as those quoted from Paragraph12.3.3.The annularpreventeron the RGV was larger than l8% inchesnominal bore. Gauges: API RP 53 also provided for pressuretesting of the equipment.Paragraph17.3.6referredto Pressure ..pressure shouldbe made at measurements gaugesand chart recordersshould be usedand all testing resultsrecorded.Pressure less than 25 percentnor more than 75 Percentof the full pressurespanof the gauge" not 17.3.7providedthat: "The results of all BOP equipment pressureand function tests shall be documentedand include, as a minimum, the testing the the sequence, low and high test pressures, duration ofeach test, and the resultsofthe respectivecomponenttests. Pressuretests shall be performed with a pressurechart recorder or equivalent data acquisition system and signed by pump operatingcompany representative- -. -" tool pusher,a-nd operator.contracto;.'s Amoco does not allege in respectof the well control equipmentthat there were breachesof Clause3.1 as regardsconformity

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any of the with all relevant laws nor Clause 11.7.1 (compliance with the Safety Case or Safety Management System)nor provisions of Appendix 74 (Appendix A at 7A page 70 and following).Amoco's Case The allegationsmade in paragraph4A ofthe Claim are as follows: ,.(l) The well control equipmentdid not meet the requirementsof Appendix 6, for the reasonsset out in paragraphs (2H4A) below. (2) The blow-out prevention ('BOP") accumulatorunit containedcontaminatedhydraulic fluid affectedby constructiondebris and corrosion.By the Termination Date: had beenreplaced,the unit as a whole was still not operational, (a) Although someofthe accumulatorunit components because (i) there remained a risk of additional componentfailure becauseof the contaminatedfluid, constructiondebris and corrosion which had previously been demonstratedto have affected the operability and reliability of the unit. The BOP and accumulatorunit thereforeneededto be strippeddown for (at least) partial inspectionto ascertainthe extentof further damage. as Such componentfailure did in fact occur subsequently, pleadedat paragraph4(4A) below; (ii) the in-line filters had not been replacedand the flow meterswere not functional(b) The BOP had still not been fully pressuretested.In particular, (i) the BOP systemas a whole had not beentested; (ii) the relevantcertificateshad not been supplied to the Plaintiff; (iii) the rams had not beenlow pressuretested; (iv) the valves on the BOP had not beentested; (v) the replacementchoke and kill lines had not beentestedin situ. (2A) As at I 5 December1998the BOP had not yet beenfunction testedso asto achievethe closing times requiredby Appendix 6 and by ApI Rp 53, and it was a requirement of DNV's and ABS's interim certificate that such testshad to be successfully compleied.On 24 December1998 a function test of the BOP was carried out which failed to meet the specifiedclosing times. Nevirtheless by letters dated24 December 1998 the Defendant (a) informed DNV and ABS that the BOP had been "satisfactorily testedas per applicableAPI standardsl6E and Df.IV MODU Rules" when in fact it had not met the relevantstandards, of and (b) confirmed to thJPlaintiffthat all certification requirementshad beenfully satisfiedwhen in fact (because the failure ofthe test on that date . . .) thev had not been. (28) was defectivesuchthat when skidding the (a) The design and/or constructionof the hydraulic and electricalcatenaries This defect were likely to be kinked or crushedand/or the electrical control cablesdamaged. cantilever the hosesto the BOP was not rectified by lfth January1999. (a) (b) As a result of the defect in sub-paragraph abovea number ofthe armouredhosesto the BOP were kinked or crushedand were in a condition that compromisedthe reliability of the well control system and was a safety hazardto personnel.The testednor replacedby lfth January1999. damagedhoseswere neither pressure (3) the BOP accumulatorunit did not have an independentback up power supply, as required by the specificationin Appendix 6. (4) The diverter had not been fully assembledand tested. (4A) Cameron Controls (the manufacturersand suppliers of the BOP) continued to carry out rectification and/or commissioning work to the BOP systemsand/or their conlrols on l-3 February 1999, 12-13 April 1999,20 April 1999,22-23 July by 1999, 26-2E July 1999 and 5 August I 999. This included work on the valves and manifolds which had beencontaminated +(2XaXii). The remote to in paragraph the debris pleadedin paragrapha{T@) above and on the remote flow nretersreferred

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flow meter on the driller's panel was not made functional until 23 luly 1999. Cameron Controls carried out a full commissioning procedureon the BOP for the first time on 5 August 1999-" The Evidence Once the system had been built, Cameron (Houston) carried out its own factory acceptancetests. ABS witnessed the tests. The to subject only to points which are not suggested be significant.The teststook place on 24 October.ABS confirmed acceptance tests for the systemwere outstanding:seeparagraph140. interim Class certificateshad noted that the function and timing The system was also commissionedby Cameron (Houston) at Sabine Passbetween 4 asd 12 November 1998,but a small numblr of componentsneededto be replacedto complete the commissioning and Mr Rimlinger arrangedwith Cameronfor them to be installed when the RGV arrived in Rotterdam. Mr Leaman (Cameron) went out to the rig in Rotterdam arriving on 19 December and departing on Christmas Eve. His Service by Report (counter-signed Mr Snow) is ifull record ofthe work he did. It included, on 20 December,his finding a looseAllen screw in the manifold regulator(item 32.2) and,on 2l December,sealdebrisas well as "a lot of debris" on the filters items 12.1 to and 12.2.o.Due large amounr of contaminationin system" he arrangedto filter the control fluid in the F{PUtank through a the home-madeflushing iig leaving it running all night onZ?December. Mr Leaman referred to "a brown-colouredscum" in in it. Mr Leaman also serviced and re-fitted the regulator. tank sight glass with some pa*icles "finer than sand" Mr Leaman believed the systemwas in working order by 23 December.But when he tested it on the moming of 24 December the annular would not cloie. The reasonwas found to be that the control valve operatedby tbe pilot line had an internal snap also ring which had popped out of its grooving jamming the piston intemally. The "close" pilot line to the control valve was to have a pellet of welding slag in it at the deck cluiter. once the snapring was rectified the annularworked. Removalof found Mr the pellet had not had that result. I should note that this account of the event reflects the evidence (which I accept)of was materially different including timing the eventto Leaman,Mr (Bryan) euinn and Mr Snow. Mr (Mel) Thomson'sevidence 23 not}4 December.I think Mr Thomson'sevidenceunreliable and probably connectedto the eventslater on 24 December:see paragraphs 4i0 and 4l l. teststhat they were "outstanding". Rowan'scomment ADC's Interim Report on the BOPs had noted in respectof low pressure ..in p.ogr"rr,'. The annulartestsand fluid function testsof the control unit were shown by ADC as "function test only" and was ..final function test in Rotterdam" respectively.Both, however, were ticked and marked up as "satisfactory 24112198" Mr by Sleightholme on a copy of the report. The referencesto "record opening/closing times" and "record volume for openMr ing/closing" and "recoid time for opening/closing from regulator pressuregauge on the unit" were also marked by Stiighthofmewithatickandthe date27/12/98,"inhand26/12/98-,andalsoatickandthedate2Tll2/9Srespectively. of There aretwo extantdocumentswhich contain recordsoftimes and pressures testscarried out on 24 Decemberbothofwhich (Bryan) Quinn and Mr Snow. As Mr Quinn put it, and I do not doubt,he are included in Appendix E. The first is signedby Mr The Annular closingtime was recordedwhat he saw.The times recordeddid not meetthose set out in the API test in 3 respects. The end pressure and the middle and lower rams closing times were 35 seconds(API 30 seconds). seconds(ApI 45 seconds) 52 writing' is in Mr Sheen's did match the ApI provision of 1200 psi after one round of closings and openings.The secondrecord form. The document itself was included in ADC's It contains the same figures set out in a different (and in fact mistaken) interim acceptancebook. It also has noted on it (as does the first document) different times of 45 secondsto open and 32 secondsto close for the middle rams. ADC prepared a Daily Report for 24 December. The report on "Hydraulics/BOP" carries Mr Sheen'sname but Mr Mr SleightLohe thought he had written it on the basis of what he understood Sheento have told him. It recorded(by reference in to the Sections ADC's hterim Report):"section 3 -Deficiencies additionalto Interim Report. The fault on the BOp control unit hydraulics has beenfound to be a loose spool in a valve. This has beenrepairedby Cameron

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4 -(It' and the systemnow works satisfactorily.Section

by items demonstrated Rowan'

Accumulator test carried The BOp has been functioned from the main unit and all stations.Functioning times are satisfactory. the system- all satisfactory"' out. Checkedfor air or fluid leaksthroughout tests.closing times Mr walker ( Amoco) who was also on the rig wrote in his report of 24 December:". . . perform functions Mr problemswith BoP Acc-eptance." walker said he got his information from Mr Sheen' satisfactoryand ADC do not foresee the rig as he did. Mr Mr Leaman said everyonewas happy witll the tests otherwise he would not have been allowed to leave Welton said the same. certificate for the RGV It was the tests carried out on 24 Decemberwhich led both to the issue of the ABS and DNV class had confirming that all certification requirements datedthat day and to BAO's (Mr McDonald) letter to Arroco of the samedate the contract (seeparagraphs147 to 150). As statedthere,the been fully satisfied and that chargeswere to commenceunder beenthe subject of circumstancesin which egS and Dl'ry expressedsatisfactionwith the BoP and Accumulator tests have on the undoubtedfact that the timings achievedon 24 December did not meet the statedAPI recriticism by Amoco, based rely on as quirementr Amoco doesnot submit that these eventshave any particular consequence regardsthe claims but does and DNV and so are mattersmaterialto their t^hem allegethat Mr Haggardand Mr McNeasewere guilty oideception of ABS to credit, including ADC In the afternoon of 24 DecemberMr Haggardwas telephonedby Mr Quinn from the rig and told that everyone Mr Quinn read out the resultsto him and he wrote them down' Mr and Cameron was satisfied with the tests.Mr Haggard said a letterto be Haggard telephonedMr Wesselinghand told him the accumulatortest had beensatisfactoryand askedhim to draft DNV. Mr Wesselingh'sfirst draft statedthat the BOP control unit "was satisfactorily testedas per apsent to both ABS and plicable ApI standardsl6E and Dl{v MODU Rules. Pleasefind enclosedthe test specificsin Attachment 1 for easyreference". letter. But Mr Wesselingh said that when he preparedthis draft he was hoping to have the actualtest results to sendwith the that it was not after and reported back during a further conversationwith Mr Haggard he was asked if that was necessary checking the ABS leller of 22 December(paragraph148). ln the event the draft letters were altered to read that the BOP control unit "was satisfactorily testedas per applicableAPI Standardsl6E and DNV MODU Rules. for that the item be deletedfrom OutstandingRecommendations the Rowan Gorilla V. It is requested I trust this informationis sufficient.... Should you have any further queriespleasedo not hesitateto contactthe undersigned." I do think that BAO's approachto ABS and DNV was unfortunate. I agreewith Mr Ellis who said he would have read the re-drafted letter as saying that the ApI timings had been met. But I do not think on the evidencethat the letter was intendedto mislead. First, I unhesitaiingly believe Mr (Bryan) Quinn when he sayshe, and everyoneelse on the rig, believedthe testshad been not only successfulbui sufficient. Despite attemptsby Mr Sheenand Mr Thomsonto say otherwise ADC's recordsspeak, (paragraphs393 and 395). Mr Quinn had no qualms about recordingthe times he did and I find speakaccurately,for themselves Therewas no attemptto hide them. They were given are and when comparedto the statedAPI times the discrepancies apparent. Amoco's (Mr Walker). Further I am quite surethat Mr Wesselingh to ADC. Cameron'srecordsare to the sameeffect. So are believed what he wrote was true and that rvhateverstandardsshould have beenmet had been met' that had he not believed(as he said he did) on 24 Decemberthat the problems Mr Haggardreadily agreedin cross-examination

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to Amoco and that it could with the Bop system had been resolvedhe would not have regardedthe RGV as ready for delivery not be deliveredbefore it was certified. was confident all was well' He Mr Haggard said he believed that those on board would know what was required and he McNeasethe times he had beengiven by telephonedfrom his home to Mr McNeasein Houston and read out to Mr nonetheless told him that the closing time for the annular was outsidethe Mr euinn. Mr McNease (who was familiar with ApI standards) they were only guidelines and if ADC and the people on the rig ApI itandards (with which Mr Haggard was not familiar) but to the office in Yarmouth were satisfiedthen the results*e.e-i."ept"ble andthe certifiers could be so informed-When he went Eve there Mr Haggarddid not havethe times with him and he did not want to retum home on christmas and met Mr wesselingh the changesto the letter to ABS to get them. Hence hii conversation with Mr wesselingh about the need to refer to them and let alone dis*J plW. I accept this evidence and am satisfied n"ith"t Mr Haggard nor Mr McNease acted in any underhand and reasonablyso and neither Mr did believe the tests were acceptable honestway in what was said to ABS and DNV. They that Rowan's Haggard nor Mr Wesselingh thought the letter was misleading. Mr Haggard was wholly convincing in saying with ABS waJased ,ipon u degreeof trust and it would have been 6azy to misleadthem. He agreedin hindsight rela=ttnship convincing in that he proiably should have referred specifically to the closing time of the annular' Mr McNeasewas equally or DNV. saying it would never even have crossedhis mind to mislead ABS to to Further,whilst consciousthat their evidencewas admittedonly in written form and so not subjected the cross-examination from Mr McKay (DNV), Mr de Quelerij (DlW)' and Mr Van which it was plainly exposed,BAO has adducedstatements Rooten(ABS), whi;h g; a little way to putting what happenedin a more favourablelight. Mr de Quelerij saysthat the timings not give are not to be viewed strictly but allow ,o*" ,oo. for flexibility and that the actualresults,now'he had seenthem, did times. Mr him any reasonfor concem. Mr Van Rooten saysmuch the sameand acceptsthat he had not askedto seethe actual that in any actual well control Snow and Mr poss also said, and (despiteMr Marymee'sdoubts) it seemsto be commonsense, the even ifthey hadto be in a suddenemergency likelihood event decisionsto shut in a well ur" noi usually taken in a hurry and would be the first port(s) of call. In other words, a few secondsone way or is that the BOP Rams (rather than the annular) another was neither here nor there. NonethelessI think the contract itself was clear that times were "maximum permissible 383) is I think to the sameeffect. lt also remainsdifficultto seewhat times": seeparagraph381. ApI RP 53 (paragraph response objective standardthe ceiifiers could have applied to justify this approach.Certainly they were not given the information on which to make any judgment at the time. Mr Walker noted in a report dated26 December: "function test BOPs and times for closing rams and hydrill OK'. Mr Walker said this entry was derived from the ADC Report for 26 December,prepared(as I find) by Mr Sheenthat read: ..1900 hrs. Repeatedfunction tests of BOP from rig floor panel in an attemptto obtain flow readings.Flow meter found to be not working. Told that there is a spare on board .... BOP functions timed by using annular and manifold pressuregauges' Timings satisfactory.Accumulator p."t.,r." droppedto 1000psi and pumping back up to 3000 psi took 6 minutes 32 seconds' i.e. more than satisfactory.Both pumps cutting in and out at correct pressures." ln fact, judged strictly against the stated API timings, the closing times of the 3 BOP Rams were still not "satisfactory". Mr Sheenhad no other acceptableexplanation for what he wrote than it meaning what it says.Mr Sheenrecordedthe figures achievedon 26 Decemberand his record also appearsin Appendix E. Mr (Mel) Thomson was the author of ADC's Daily Report on "Hydraulics,/BOP"for 2 January.He noted: ,.Function Flovrlinevalvewould testingof diverter valves- 4" valve on fill-up line functionedopen- closed satisfactory. welding slag/debrisfound. This was not operate in either direction, hydraulic lines disconnectedand blockage causedby clearedand lines flushed. Valve norv operating satisfactorily." (The valve had beeninstalled on 1 January)'

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Mr Mr Sleightholme,Mr Thomson, Mr Cowie and Mr Price met Mr O'Brien and Mr Slater on 3 Januaryat the conclusionof first visit to the rig. The record of the meeting containsno referenceto any problems with the BOP O'Brien and Mr Slater's system. Mr Cowie said ( and I accept)that after he retumedto the rig on 2 Januaryhe reviewedADC's report and cameacrossthe actual test resultsfo r 24 Decembeirecordedon two documentsin ADC's papers.Mr Sheenhad left the rig on 3 I December.Mr Cowie noticed that the resultsdid not meet the API timings. He was extremely angry and thought that Amoco had been deceivedby Rowan/BAO as the certification requirementswere the basis for BAO's 24 Decemberletter putting the rig "on contract". He took the matter up with Mr @ryanjeuinn in strong terms. There is no disputethat Mr Quinn's immediateresponsewas that Rowan would do the test again.Having heardboth Mr Cowie and Mr Quinn I haveno doubt that Mr Cowie genuinelybelieved that Amoco had been deceived but also no doubt that in fact he was wrong in the sensethat Mr Quinru and ADC, had made an innocent mistake.I acceptMr euinn's evidencethat he did not know the precisetimes required.On the other hand, I think Mr may go some way to explaining Mr Sheenand Mr (Mel) Thomson'seviCowie's undoubtedanger and their embarrassment (including, in Mr Sheen'scase, a fax sentto Mr Hay on 3 Januaryand his tally book) seeking,despitethe clear docudence mentary evidence,to distancethemselvesfrom and indeedto contradict the eventsand recordsof the testswhich did take place on24 and26 December.I regret to say that I found that evidenceto be untruthful. In particular I cannot acceptthat Mr Sleightholme misunderstoodor misrecordedwhat Mr Sheentold him nor that Mr Sheen u.rd Mr Thomsonsimply chancedupon the test being carried out on 24 December.Nor can I acceptthat they did no more than watch it. Mr Walker was aware of the intention to carry out the test beforehandand I unhesitatinglyacceptthe evidenceof Mr Snow and am surethat Mr Sheenand Mr Thomson were also awarethe testswere to be carried out and were presentto witness and them. Rowan/BAO's target was to achieve acceptance Mr Mel Thomson was aware (as was Mr Leaman)that Mr Leaman would not have been atlowed to leave the rig for Christmasbefore the systemhad been satisfactorilytested.I also acceptMr had performed Quinn's evidencethat he discussedthe tests afterwardswith Mr Sheenand everyonewas happy that the system 2 Januaryeveryonewas proceedingon the basisthat the test very well. It is apparentthat until Mr Cowie raisedthe matter on had beenpassed and was satisfactory.Moreover I think the reasonwhy the testswere repeatedon 26 Decemberwas that ADC's (but not ApI RP 53) required further information than Mr Sheenhad recordedon 24 Decemberbut which he did report form record on that date(seeparagraph406). On 3 JanuaryMr Cowie, Mr Price and Mr Quigley noted that an attempt had beenmade to record opening and closing times again for the rams and annular but the accumulator unit was malfunctioning. Decreasingpressurein the manifold regulator producedan increasein pressureon the annular and flowline seal gaugesMr Leamanretumed to the rig in the early morning of 4 January.His Daily Report Sheetfor 4 Januaryshowsthat the problem with the accumulatorunit was to be dealt with, after advice from Mr Lehmker, by fitting a check valve in the return line. The and report also recordsthat the pressureon the manifold regulatorwould not decrease that Mr Leamanremovedthe shearassist "the internal parts viere all blocked with some sort of debris (metallic or fibrous)" and that the piiot valve (item 76) and found intemal filter screenhad split and been pushedback into the valve body causingintemal damage.A new valve was orderedand the filter repaired. The next day Mr Leaman'sreport records that the timings of the BOP operationswere raised with him by Mr (Bryan) Quinn. that the control fluid would be replacedwith a less viscousfluid Closing times were said to be too slow. This led to agreement which was orderedalong with flushing equipment. for The Amoco people on board the rig were kept fully informed aboutthe problemsas appears, example,from their report of 4 Januarywhich noted: this would involve stripping the "[Mr Leaman] is of the opinion that the whole system requires flushing to ISO standards, the stack.Obviously this would take sometime control unit, disconnectingthe lines to the drill floor and the operatinglines to

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debris in the and we will await Rowan's decision on the way forward, but it confirms that the fundamentalproblem could be when the unit is up and running." system.The question of operatingtimes will have to be addressed This is a different exercisethan stripping down the whole systemas it hasbeenreferredto during the trial and in Amoco's case, itself but more than Mr Leaman says hasaid. It is not difficult to see how there might be confusion. The flushing exercise require BOP stack.lt would also necessarily involves disconnectingall the iines to the valve module and from the moduleto the repair or replacement-ofcomponentswhich were found to be blocked when the systemwas functioned after the flushing was both the debris in the systemand completed.There is no disputethat the flushing and replacementfluid was intendedto address In times. Nor does BAO suggestthat the problems did not need to be addressed. the event I seeno needto try to the closing resolve thE various conflicting u""o*ir of what Mr Leamanmay have said. I accepthis evidencethat he did not believe that a strip down of the whole systemwas required at this time let alone after the flushing exercisehad been completed. On 6 JanuaryMr Leaman recorded that*4 armouredhoseshad been crushedwhen the derrick had been skiddedback". One "we cannotget access hose was said to be crushedalmost flat and the condition of all 4 was said to be indeterminablebecause to internal damage".Mr Leamanrecommended Mr Quinn that he inspectthem. He also through the armouredsheathto inspect sought an extra man from Cameronto help to flush the system. On 7 JanuaryMr (Brian) Thomson arrived on the rig to assistMr Leaman.The tanks and accumulatorswere drainedand Mr i'Reservoir inspected and found large deposits of metal and other unidentifiable materials' Sample Leaman's report noted: provided for further inspection". In anotherreport ofthe sameeventsMr Leamanreferredto "large depositsof welding slagand other substances". and flushed Mr Leamanand Mr Thomsonbeganto flush the entire hydraulic systemon 8 January.The lines were disconnected through. Mr Leaman also redressedthe valve (item 76) removed on 4 January(paragraph413) and re-fitted and tested it. Flushing of the systemcontinuedthroughout 9 and l0 January.On 9 JanuaryMr Leamanreferredto "large rust depositsseen coming from hoses", and on l0 January to the fluid being clean to NAS, Class 10. There is no other report of the flushing exerciserevealing or evidencingany other debris in the system. The specified standardwas NAS Class 10. That is a referenceto National AerospaceStandardswhich state maximum contamination limits basedon a 100 ml sample for fluids in hydraulic systems.The lower the number of the classthe cleanerthe fluid. The Class l0 maximum limits were 256,000particlesizesof 5 to 15 micronsrising up to 250 particlesizesof 250 miof crons. Class 9 required 50%o those figures and Class 8 50yo ofthose for Class 9. The classesranged from I to 12 each changing by a factor of 50o/o. On I I Januarythe reservoir tank was filled with the replacement,less viscous fluid. Mr Leaman and Mr (Brian) Thomson's note dated I I January,which they confirmed in evidence,records: "Function testedBOP rams and timed them opening and closing. Timings found to be within Rig requirements. Waiting on Rig Managerto passsystem timings." On 12 JanuaryMr Leamanand Mr Thomson'sdaily report sheetrecordsthat they fitted two checkvalves in the return line as advised by Mr Lehmker (paragraph413). The report continues: Carried out BOP test and function valves on BOP stack. All ram valves closed within specifiedtime and the Annular closed within 40 seconds. Carried out Accumulator Test again. Shearassistfound not to be working. Shearassistpilot valve removed stripped down cleanedand examined as far as possible.Found possibleproblem with internal checkvalve being stuck and not New valve ordered.... allowing fluid to pass. was fully functioneCduring the evening. Mr Gray's tally book suggests I: was noted that, savefor the sheara:;sist,the s1'stem

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confusing I that in fact one closing time for a Bop Ram was 1 second in excess of API RP 53. Although the evidence is at best tested on either I I or 12 Januarybut failed shortly afterwards do think it improbablethat the shearassisthad been successfully The valve had beenfound on the occasionrecordedin this report. The report itselfsuggestsa lack ofsurprise at what happened. on 4 January (paragraph 413). Mr Leaman had to reinstall it to carry out the flushing exercise on 8 to be blocked by debris was January (the replacement had not arrivad and blanking caps were not strong enough to withstand the flushing) and as he still containeddebris which he failed unaware of its intemal configuration I think the probability is that contrary to his belief it to remove but which had been present on 4 January before the flushing exercise. The valve was unique to the system in incorporating two small opposingintemal checkvalves: See also paragraphs433 and 435. ..observations/concems" provided to Mr O'Brien on 13 Januaryincluded a referenceto the well control system: Mr price's ..The BOp control system was found to be out of specification. Further investigation pointed out that the system was contaminated with solids and emulsified hydraulic nuid. this required the Cameron engineerto insist that the entire systembe party flushed and displaced with a less viscous fluid. This was accomplished during the tow to the standby location. A third now verifu the system. inspector will any, let That is an expressand uncritical referenceto what it was upon which Cameron had insisted.There is no referenceto It also accordswith alone a compiete,strip down assumingthat was understoodto be different from flushing the entire system. Mr Leaman'sevidenceand what was in fact done. at the beThe daily report for 13 Januaryrecords that the system was fully functional on the evening of 12 Januarybut that of a problem with the manifold and ginning of ttre sirit on l3 JanuaryMr Leaman -d Vt. Thomson had been called because The report recordsthat when the arrnulai regulators (32.2 and3Z.i) on which pressurecould not be increasedor decreased. 500 psi and then stopped and faitgd to go,any higher' Mr Leamanand Mr system wai chargedup pressurerose rapidly up to to the inThomson noted that there was "good preisure and good flow" after the inJine filter and on the inlet supply the sameapplied at manifold (item 66). But pressureat thi regulator was 500 psi and would not increaseand crease/decrease each componentafter the manifold in the line. manifold Mr Leaman and Mr Thomson concluded that this indicated there was "a possible blockage somewhereinside the all ports andvalves, reassembled air block". It (item 66) was strippeddown, cleaned,examined,had compressed blown through problem and refitted but the problem persisted.The regulator was also stripped but nothing was found to be wrong with it. The manifold should be checked it was suggisted that the increase/decrease was discussedon the telephtne with Mr coull and comagain as a filter might be tlocked. Mr Leaman and Mr Thomson therefore re-strippeditem 66 "into smaller individual pon"ntr" but found nothing and the problem remained when it was re-fitted and the systemtestedagain. A replacementwas ordered. to The next day (14 January)the diverter regulatorwas found to be passingfluid. one of the sealsunder a seal plate was found was rebuilt and the sealreplaced' be damagedandan Allen screw was "floating around in the body of the valve". The regulator ..even further" once again. Nothing was fotrnd. Further pressuretests were carried out along the Item 66 was stripped down of any on system. Inlet and outlet pressures item 66 wereit 3000 psi. That could only be so if item 66 itself was not the cause the regulatorthrottle valve (item 62.5)" 0-250 psi was was tested"below problem. The daily report notesthat when the pressure to achievedvery quictty but from 250 psi'the pressureincreasewas very slow" (The referenceto item 62.5 should have been noted that when the pilot filter (item 15116)was removed and the systemretested"inlet pressurewas 62.1). The report also Mr more stable", and that, over an hour,s testing, "the operation of the regulator was oK". However in his "closure Report" *the i"rpo.r." was a little better but still not working correctly". Mr (Brian) Leaman wrote that after removing item 15/16 Thomson also said the regulatorwas still not working properly when Mr Lehmker arrived on 15 January. Mr Coull reportedto Mr Duensing (Mr Lehmker's superior) on 14 Januarythat:

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..The system was drained of control fluid and flushed/purged with clean fluid, but from experienceany system being subjected will further failures of components to this iegree of contaminationwithout a major strip down and overhaul of all components, occur." relies on this report as supportfor its casethat the systemrequiredto be strippeddown and indeedthat Amoco understandably that this was Cameron'sview was sentthe next day (paragraph166).But the Mr Leamansaid asmuch. Amoco's letter asserting Coull was that the statementin his report to Mr Duensing had been derived from his experiencewhich was evidenceof Mr obtained on much finer small bore hydraulic systemsand that Mr Duensing's responsehad been that a strip down was not required and the matter should be left to Mr Lehmker who was going to the rig on 15 January. Despite the attack on this evidence, I acceptit as truthful. Mr Coull was an impressiveand straiglrtforward wibressand his evidencederives some support from a later report (seeparagraph 452). Mr Lehmker was in fact unaware that the systemhad been flushed until 15 January, and that any or any further function tests carried out no one was suggesting once the flushing had bien completei and subsequent form of strip down was required in any comparablesense. On l5 JanuaryMr Leaman and Mr Thomson took samplesof fluid in the HPU tank and the Accumulator Unit and found they were NAS Class 10 and Class 9 respectively. Mr Lehmker arrived from Germany on 15 Januaryto assistMr Leaman and Mr Thomson. Mr Lehmker gave his evidence with on the assistance occasionofa German interpreter.The daily report noted that they had carriedout a function test on the Shear the Assist which failed because pilot valve (item 76) falled. The report continued: ..Removedvalve and inspectedfound that the checkvalve was full of debris The regulatorsfor both the BOPs and the annularwere also found not be working. Mr Lehmker had stripped item 76 down further than Mr Leaman had done. He wrote a note recordingthe work he performed on l5 (and 16) January.In relationto item 76 his note records: there was a lot ofdirt and debris insidethe valve housingcausingthe hydraulic supply fluid to be blockedat the inlet side so that no hydraulic outlet signal could passthrough this valve. In relation to the regulators,Mr Lehmker noted that: ..It was found out that the ... pilot valve block (item 66) ... created the problems. This valves are installed to ensureeither (item 32.1) (item 32.2) ... andofthe ... Annular Regulator of remoteor local pilot operation the ... BOP - Manifold Regulator ... lt was decided to replacethe ... pilot valve block becausedamagewas assumedto the internal parts during the operation by time ofthe BOp Control Systemwith heav(it)y contaminatedfluid. This was also (supported) the inspectionof the inlet fluid was totally clogged with debris and dirt ...." supply filter element(item l6) of this valve that Item 66 was changedout on 15 Januarybeing replacedby one from the RGVL The shearassistvalve was changedout on 16 441) and has causedno problemssince. January@aragraph On 16 JanuaryMr Leaman continued to flush the HPU tank until the fluid was cleanedto NAS Class 8. daily reportcontinues: Mr Leaman's and manifoldreplaced tested... systemworkedas and Decrease ShearAssistvalve and Increase "spares arrivedon helicopter. it should at the correct pressure.API test carried out on BOP testing timings and function. Test passedand signed off by Rig Manager and ADC examiner."

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dated 16 January signed by Mr @ryan) Quinn and Mr (Mel) Thomson,a There is a test sheetshowing timings and pressures copy of which is included in Appendix E. In his "Closure Report" Mr Leaman also recordedand Mr Thomsonsaidthat after the test had beenpassedfunctional checkswere successfullycarried out severalmore times and that whilst diverter functions had the not been carried out because diverter was not fitted "it had tested OK and without problems previously". Mr Lehmker's notesfor 16 Januaryalso refer to fitting a new Item 76 andthen Item 66 and continue: "With this new installedparts it was possibleto start an official customerwitnessedBOP-Stackfunction test.This test includes the operationof the integratedShearAssist systemand alsothe local/remotepilot operationof the ... BOP-Manifold Regulator and the ... Annular Regulator.During the test actual BOP operation times were measuredand recordedin the attachedtest sheet. The Accumulator Volumetric Capacity Check was also carried out and the results were recordedin the attachedtest sheet. The system charge time from prechargepressureto maximum working pressureis also recordedin the attachedtest sheet. to The achievedtest resultswere totally in accordance the customer expectationswithout any objections,so that the attached test sheetwas signedby the rig managerand the ADC inspector. "The attachedtest sheet"was the sameas that referredto by Mr Leaman (Appendix E). Mr (Mark) Jonesrecordedin his tally book "BOP function testedto the satisfaction of ADC and BP Amoco". Mr Price also said the test was satisfactoryand that apart from two flowmeters everything was working on the BOP control unit. On 17 JanuaryMr Leaman checkedthe equipmentand noted "no problems seen,systemworking fine". He left the rig on 18 January.He said that when he left he was confident that the systemwould function l00Yoand he did not think or saythat it was Mr necessaryto strip down the accumulatorunit or inspectthe chambersof the BOPs. In his witness statement Leamansaid: "The stepswhich I took with Brian Thomson to flush the unit and the parts which were replacedamountedin my view to a stripping down of the unit. We had isolated the tank, the pilot and control lines and various other componentsof the system, including valves and regulators,and each was flushed thoroughly. We had also stripped down, cleanedand repaired all parts which were found to be affectedby contamination.I have no doubt that the exercisewas appropriateand successfulin dealing with the problemsthat had arisen.There was a possibility that, as a result of contaminationhaving been in the systemprior to the flushing, or because there was a very small amount of debris left in the system,one or two componentsmay need to be changed out later. The need to do so could be minimised by regular maintenance,such as changing filters, sampling and flushing, and any parts which did need to be changedout could be changedquickly, using the sparesonboard" I acceptthis evidence astruthful. IvIr Lehmker said much the same. Mr Mel Thomson'sdaily report for 19 Januaryreferredto a function test on the diverter system.It notedthat the systemwas "in good working condition" but with "deficiencies" statedto be: Regulatorsfor flowline seals,overshotpacker, and diverter packerelement could not be operatedfrom the drilling panel,or the offrce panel, trip tank pump also could not be operatedfrom drilling shackon startlstopfunction. on The problem (describedby Mr Gray in evidence)was similar to the problem on the Annular and BOP system.Pressure the diverter functionswould rise to 500 psi but go no further. Moreover all three diverter fimctions sufferedfrom the sameproblem: the flow-line seals,the overshotpacker and the diverter packer.The problem was attributed to the diverter increase/decrease manifold block (item 67). Neither Mr Marymee nor any other witness could explain how debrisin the inlet line could possibly at causethe pressure go up to 500 psi and then stop for one let alone all three valves. Nonetheless the time, as with item 66, to the problem was rhoughtto be causedby debris in the valves. 193-194) and The siatus cf the sysiemat 19 Ianurrryhas also to be seenh the light of Mr O'Brien'sreports(Paragraphs

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,.Omissionsprofile", (paragraph190). So far as material as regardsthe Well Control Systemit was recordedthat the problems which had been with the manifold pr"rr*J."gulator (item 66) and shear assistpilot valve (item 76) required replacements system was "hydraulically operational". Mr O'Brien could hardly have thought that sucfitted on 17 Januaryand the control tests could be canied out in 5-7 days if he really believed there was a seriouscontaminationproblem recessful acceptance tests quiring a strip-down of the entire system.Moreover there is no dispute that BAO had agreedto Mr O'Brien's acceptance Mr O'Brien did say he was confident the which Mr OBrien agreedwould have exposedany remaining problems in the system. system would fail his test but that is not what his report says. ADC,s final report on the Well Control Equipment included a "Summary", written by Mr Mel Thomson, which statedthat: Although a certain amountof BOp testing has beencarried out, someremainsto be completed.For details seethe checklistsin the following section.Acceptableclosuretimes for the BOP rams and annularwere only achievedafter changingthe hydraulic fluid to a lower viscosity. ..Recordopening/closingtimes" and the "final ADC comment" "Satisfactory, Seefinal resultsbelow". The checklists included They also referred to certainlow pressuretests as "outstanding". The ..final results" were those which had been obtained on the test carried out on 16 January,the record of which had been signed by Mr Quinn and Mr Mel Thomson at the time (paragraph440 and Appendix E). ADC's final report on the diverter recordedthat everything on ADC's requirementswas "satisfactory". Mr Gray and Mr Perkins by said the diverter was testedin the early hours of l9 Januaryin a manner suggested Mr Mel Thomson-The test was witnessed by Mr Thomson and apart from the pressure rising to and remaining at 500 psi everything was satisfactory. Item 67 was changed out a few days later for one from the RGVI. The damaged hoseswere the subject of a CAR (lrlo 55) which "suggested""at least a pressurere-test or replacementof the sections". On 19 Januarythis CAR on which Mr (Mel) Thomson had written "completed" was signedoffby Mr Sleightholme. Mr Leaman and Mr Coull wrote a "Close-out Report" dated 2l January.It was Mr Coull who wrote that the systemhad been that another failure would not occur". The left functional but, becauseof the contamination there could be "no guarantees Report did not, however,make any referenceto a strip down ofthe system.Mr Coull said in evidencethe systemwas readyfor He use and if there was a failure it would be a matter for maintenance. said you can have a failure in any systemand that is why and are not single point failure. It would of coursehave been wholly irresponsibleand in dual redundancies the systemsbuild commercially disastrousfor Cameron to have left the rig at a time when it was believed to be going to Arbroath if they had thought their systemwas in any way unsafe or unfit for use. evidence ADC's final report also included a copy of CAR 56, one of the 3 CARs which were issued"late". Mr Sleightholme's was that the form usedwas not the sameas the form he usedfor CARs up to the time when he left the RGV for the last time on him asteam leaderfrom 5 January,must have 5 January. It was thereforehis conclusion that Mr Mel Thomson,who succeeded on the form. Indeed from its wording it must have beenprepared issued it after that date.Mr Thomson wrote the number "56" after the flushing exercisewas completed. The evidenceof Mr Price and Mr Quinn suggeststhat it was preparedbetween 16 and 18 January. The wording, underthe printed heading "Non-Conformance", is: amountof the Due to constantproblemswith the B.O.P. control system,and control hoses, systemfilters showeda considerable foreign particles. There were numerous operationsof the BOP Rams before the contaminatedfluid was displacedwith clean it practices would be stronglyadvisedto openat leastone ofthe operating ofgood engineering fluid. Theretbrein the interest chambersfor inspection.

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is borne out by Mr Sleightholme said he discussedthiswith Mr Thomsonwhen they were preparingthe ADC final report. That l9l1/99". Mr Sleightholme'shand-written comment on the document"Not done at I would make the following comments' ..advice"is to open one BOP chamberfor inspection.The evidenceis that this would enablea visual i) The only strong from a inspection to be made of tf,e piston, the cylinder bore and the sealsto seeifthere was any scoring.That is very different strip down of the whole systemas Mr Thomson agreed. he the ii) lt ftce acceptedthatihe contentsofthis CAR addressed concemwhich he had about debris in the systemand which IndeedMr Price said, and I accept,that the CAR was issuedat his request. had expressedtqMr Quinn. fluid" was replacedover a period of 4 days ending on I I Januarythe CAR must have beenprepared iii) Asihe ,.contaminated 16 by Mr Thomson after that date. His evidence to the contrary is mistaken and I think it unlikely it was preparedbefore January. iv) The languageused is of good engineeringpractice.There is nothing to suggestthal the matter was seenas one involving serious safety considerations. v) The CARis the only documentaryevidence of any "concern" about contamination apart from the 15 Januaryletter (Paragraph 166). But its terms are much more consistent with the 20 January letter than that letter (Paragraph 172)- The 20 January ietter ack to*ledged that the accumulator unit was "now workingo' save for some flow meters (which it is agreedwere not important: paragraph477). as to Mr euinn said he thought it was not only unnecessary openup a chamberbut positively dangerous it could lead to damage done it unless Amoco had insisted and acceptedresponsibility for it. He said (and I to the unit. He said he would not have accept) that when Mr Thomson handedthe CAR to him, Mr Thomson said he had been instructedby Amoco to give it to Mr Amoco insistedit would have Mr euinn but Mr Thomson himself did not believe that i1was necessary. McNeasesaid that had judgrnent was in fact right: seeparagraph465- I also So been done but he too thought it unnecessary. did Mr Marcom. Their tests.Rowan judgment at the time supportedas it was by the successful have no doubt at all that it *as an honestand reasonable personnelnor indeedwhat was a major assetof Rowan. But I also have no doubt that and BAO would not risk the safetyoftheir had Amoco insisted BAO would have done as asked. It is an important part ofthe reasoningof Amoco's expertsthat further failures or malfunctionsoccurredin the hydraulic control system after 19 January,and so afteithe comprehensiveflushing of the system,which were causedby or at least attributedto contamination remaining in the system. There is no doubt (or dispute)that later failures or malfunctionswere attributedto contamination.It follows and the evidenceis that such failures were thought to be the sort of matterswhich could be causedby contaminationeven after flushing. But there is doubt and dispute as to whether (save in one case)the attribution to the earlier contamination was correct. It is I think material to note that Cameronwere wary of Rowan blaming Cameronfor problemswith the systemand whilst I do not mean by that to were anything other than genuinely held both at the time and indeedfor long afterwards,I do suggestthat the views expressed contaminationhad come to createsomethingof a mind-fix which can now be seento have beenoverstated. think that Mr Leaman was sent out to the RGV again on I Februaryto investigatea fault with some flowmeters. It is agreedthat the fault itself was not a matter of any material significance (Paragraph477). But whilst investigating it Mr Leaman recordedthat another fault appearedwith the replacementmanifold block for the diverter (Item 67) which was passingfluid. The valve was removed and stripped down. Mr Leaman noted on 3 Februarythat "small depositsof debris was found in the intemals these were cleaned up and valve tested and found to be working correctly". It was then reinstalled and worked correctly. Amoco submits that this was the first date on which it could be said that the well control systemtestedsatisfactorily. In April 1999 there was a further problem with Item 67. On this occasionMr McPhail was sentto the rig by Cameron.IIe found erratic pressurereadingsand fluid passing.He arrangedremoval of both items 66 and61 for testing and repair where required. Whilst there Mr McPhail checkedthe cleanlinessof the hydraulic fluid and some filters reporting that the fluid was in rea-

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sonablecondition and that there was no excessivecontaminationin the filters. On l3 May Mr Coull sentMr (Bryan) Quinn atechnical report and proposalto "repair and function test" the RGV BOP system. to The conclusion ofthe report was expressed be: "Both the manifold valves (Nos 66 & 67) have becomefaulty due to the initial ingressof contaminationin the systemand will have to be removed and replacedwith new units." In fact Mr Coull was, I am satisfied,wrong in attributing the matters dealt with by Mr McPhail in April to debris.Mr McPhail did not do so and Mr Ellis convincingly explained the likely causeof what Mr McPhail found which had nothing to do with debris. On 22 and 23 July Mr (Brian) Thomson retumed to the RGV. He replaceditems 66 and67 with new valves. But when testedit was found that the same pressure control problems appeared as before. He also noted that one (item 40'3) of the mini-accumulatorswas set too high (at 35 not 10 bar) and also referred to adjustingthe throttle valve. 35 bar is about 520 psi. After adjustmenthe tied the throttle valves into position. Oo27 luly it was noted that the new valves were leaking at a rate of about half a litre a minute. On 28 (or 29) July 3 small piecesof welding slag were found in the hoseleadingto the 4" blockvalve (Paragraph379) at the bottom of the fitting at the deck cluster. Tests were carried out after removal of the slag which were wholly satisfactory. Amoco nonethelesssays this incident is symptomatic of the risk of finding debris and debris causing functioning of the part. This is consideredfurther inpatagraph 482' malfunctions even after flushing and apparentlysuccessful Since 19 Januarythe BOP system has been function testedregularly including function and pressuretesting in Dundee and Canada.The annular was stripped and inspectedin Dundee in September1999. No debris or scoring was found. The system underwent a successfulpre-drilling test in Canada.The BOP ram covers were removed on 17 February 2000 to install cold weather elastomers required for Canadian conditions. No debris or scoring was noted as being present in the operating chambers.Expert Opini ons divergencesbetweenMr Marymee and Mr Ellis as to the Whilst as the factual evidencedevelopedthere were understandable number and nature of the incidents of debris being found in the system and their significance,the nature of their disagreement and the measureof any agreementis reflected in a Joint Memorandum dated 5 March 2001. For Mr Ellis it was significant that such contaminationas was found was in the pilot signal lines not the main supply lines, that it was not unexpectedto find it in filters (which exist to catch it) and the FIPU tank and the flushing and partial strip down or Mr change-outof parts found to be defective was both effective to remove it and a praper and usual response. Ellis also made point that there was a difference betweenthe debrissuch as the Allen screw and snapring which were containedwithin the the parts and debris which could affect the whole system.The former were not symptomatic of more widespreadcontamination. Mr Marymee's emphasiswas on the acceptedsafety-critical nature of the well control equipment,and the risk of further conIt tamination with unpredictableconsequences. was his opinion, despitethe limited terms of CAR 56, that the control system to should have been completely stripped down prior to drilling and that it was necessary strip down and clean all mechanical componentsin contactwith the fluid. He also consideredthat all carbon steel piping should be "pickled" (a processof placing 419). acid in the pipe) to remove rust. That was becauseof the referenceto rust being seenon 9 January@aragraph The expertswere also in disagreementabout pressuretesting and as to the extent to which it had in fact occurred.They agreed prior to the start of drilling operationsand at least fortnightly thereafter as a that the whole system would be pressure-tested matter of routine. test did did times achievedon24 December not satisfyAPI RP 53, but that the l6 January They were agreedthat the response satisfu all applicable standards.

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system pumps to have an independent power They were agreed that the recommended practice was for each of the control pump could be supplied from either the main or the supply. Mr Ellis thought the design met this criterion becauseeach componentwas hgaq-copper busbarin the switchboardwhich' in any event' emergencypower supply and the oirly "o*onre-wirin! if anyone t had really ittought it necessary' Mr Marymee disagreedwhilst could have been dealt *itn Uy 6-g hours of was improbableand could be dealt with by re-wiring' acknowledgingthat failure oithe switchboard therewas ampletime to Mr Ellis considered by They were agreedthat the diverter systemhad been fully assembled 19 January. days berorl it would be required. The experts disagreedon the importanceofthe pressuretest it as an installed system in the psi. Mr Ellis also consideredthere was ample time to diverter manifold block (item oz) *trict could not be adjustedfrom 500 obtain a replacement. about their integrity' The damagedhosescould have been replacedwith spareson board ifthere were doubts In summarythe conflicting positions were set out in answerto the question: ..WastheBoPControlsystemfitforitspurposeat|glanlnry|9992" was: Mr Ellis' response ..yes, the BOp Control Systemwas capable of controlling all frrnctionsof the BOP and Diverter on 19 January 1999' Minor 67) could and would have easily been troubleshootingand repair (including repair or replacementof th" manifold block Item the diverter or BOP stack"' completedprior to the needto deploy Mr Marymee'sresponsewas: ..In my opinion, the Rowan Gorilla V BOP Systemwas not fit for purposeon 19 January 1999 fot reasonsincluding, but not Manifold Block (Item 67) was not properly controlling the limited to, the following: l) The Diverter SystemIncrease/Decrease further contaminationcausedequipmentfailures (asoccurredwith the 4" Block pressureregulators;?) the;eremaineda risk of were not functional,theseflowmeter Valve 29 July 1999); 3) the Driller's and Toolpusher'sControl Panel flowmeter displays BOP Control System pumps were not displays *"." u requirementof the certification standardDNV Drill (N); 4) the two arrnour and the integrity ofthe unsupplied by independentpower sources; and 5) some ofthe control hoseshad damaged testing specified by the BOP System had not completed acceptance derlying hosesshould have been verified. Add:itionally, ContractAppendix 6 ...." essential.The flowmeters on the main I should add that the flowmeter displays were agreedto be "desirable" but in no sense no rJevant contractor classrequirementfor them. DNV Drill [N) was applicable control panel were working and there was testswas for "maximum peronly to drilling in Norwegi-anwaters. The only contractualrequirementas regardsthe function page 68' missible r"rponr" times" io be as per API RP 53-API RP l6e: seeAppendix A at .,independent"power suppliesis overwhelmingly that it was-of no significance.It did not trouble The evidence in relation to had requiredit. The position DNV or ABS or HSE. It was not iequired by the contract.It could readily be dealt with if anyone Mr Snow'sevidencethat the integrity of the wrderlying in relation to the hosesis equally clear. I acceptMr (Bryan) Quinn'sand was damagednot the rubber hose inside' rubber hoseswas establishedby inspecting and tesiing them; only the outer sheath carried out iithout a problem which must have involved functioning the hoses' It Moreover various tests were in fact later 451). The same were on board). ADC were content(paragraph would have taken only some 3-4 hours to fit new hoses(spares the if he had conceded point insteadof hosesare still in use on the RGV. Mr Marymee would have done himself more credit no placeat all in a disputethe seekingto maintain a position which t think was exposedas untenable.Thesemattersreally have law of repudiatorybreach of contract' puru-Jt"r, of which are set by Clause 28 and the that all \lot only i:r it recognised significance. or aboutpressure-testing the lack ofit arealsoofno substantive The allegations

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fortnightly thereafter)I acceptthe relevant tests would routinely be carried outjust prior to the start ofdrilling (and at least 'wesselingh pressuretests were carried out at SabinePassas they and Mr Snow that in fact low evidence of Mr perkins, Mr or ,ugg"uted any reasonwhy the tests would or mighl have-failedhad they been carried out describedand no one has "rr"n Bartle and Mr poss that any further testing would not have affected "the critical pattri' for repeated. It is also agreed by Mr testsin the 8 days or so which would elapsebetweenthe operationof the RGV b".urri" there would be ample time to carry_out RGV arriving at the Arbroath platform and the commencement of drilling. judgment it hasto be found and found only in If there is any substanceto be found in Amoco's complaint under this head in my createdby the risk of the contamination issue.That case is really foundedon what is said to be an unacceptableuncertainty risks far beyond reality or what any reasonable continuing contamination.But in my judgment Mr Marymee carriedtheoretical I think Mr Ellis' inferencefrom the actualfacts could sustain,and beyoni any requirementwhich could be requiredby ALARP. ofthe matter. a realistic and measuredassessment evidencewas much to be preferredas would be on it if a well The people best placed to judge the actual risks were those on the rig, perhapsparticularly those who Ro*u.r, Cameronand ADC and Amoco personnelwho were party to the eventsinvolving the control incident occurred.Allif views as docuBop System were experiencedpeople well aware and respectful of the safety considerationsinvolved. Their It is now known thatthey were right mentedare all of a kind. Theirjudgment at 19 Januarywas thatthe systemwas satisfactory. (weekly' on the evidence) it because has proved itself in bunudu in the sensethat it hashad no problemswhen testedfrequently openedup to changeseals(to meet Canadianconditions)no damage and when the operatingchambersof the Bop were in fact of stood by his opinion that all n-arts the systemin contactwith the was found to them. Mr Marymee,at least at first, nonetheless down and that it should still be done even today. He later modified that view to suggestit would be fluid should be stripped judgment that is to ignore reality. IndeedI think sufficient now to do only..half'a strip-down ifthat revealedno problem. In my well as an inability to accept as fact what had plainly been that was a characteristicof some of Mt vtu.y-ee's evidence as establishedto be so. to that flushing is the usual response debris in a hydraulic systemand there can be no disputethat the There is some agreement fluid cleanliness flushing carriedlut by Mr Leaman and Mr (Brian) Thomson was very thorough and achieveda standardof There are?as I find, satisfying explanations for all the incidents which might better than that called for by the specification. is a complexvalve as otherwisebe characterised illustrations of debris remaining after flushing. Item 76 (the shearassistvalve) might well not remove and the only one of its configurationon the rig: it hastwo internal opposingcheckvalves sothat flushing by it (paragraph debris lodged there. The p.iuuuitity is that the debris was presentbefore the flushing and was not removed Thomsonthat they believed the 4" block valve of the diverter 423). Despitethe evidence(albeit uncertain) of Mr snow and Mr to havedebrisin it and systemhad been successfuliyfunction-testedthe day before the occasionin late July when it was found about the date ani number of tests I think that unlikely. I can think of no good reasonwhy some confusion in the documents was testedsucBAo shoutd want to test the systema day after a successfultest and so I think it most unlikely that the valve Had that happened, documentssuggest. cessfully on 2g July but unsuccessfullyon 29 July as Amoco contendsand some ofthe judgment the probhowever, I think it would probably have been expressly recalled if not recorded,which it was not' In my that it would otherwisehave beenmanifestearlier and its location, is ability, especiallyin view of it, ."dundu.rcy, the likelihood time the that this was the first occasionthe valve itself had been connectedto the hosessince the flushing and so also the first line' had dead-end whole line had beentested(seeparagraph 464).Thus the debris,found in effect at the end ofa self-contained off debris been there at least since the flushirig exercise. Mr Ellis explainedhow if the hoseshad been testedwhen blanked fluid could move into the valve and to the valve the pressurised would hardly move in the line but when they were connected but also force the debristo the deck clusterfor the first time. In other words it is an illustration of debris remainingafter flushing when first tested. Even if I was wrong in this conclusion I do not think the discovery of debris in one of it revealing itself problem. redundant line even after a successfulprior test would begin to justifu concern that it was symptomaticof a wider probability is Mr Lehmker is right that the Moreover. albeit a very late BAo entry in the suggestedcauses,t also think the frustration problems with the lnunifold blocks (items 66 and 6n *"t" nothing to do with debris or contamination.Mr Leaman's and finding no contaminationand nothing wrong with it was wholly genuine. I at stripping down item 66 on three occasions provided for one let ugr"" *ith-M. Lehmker and Mr Ellis that no sensibleexplanationattributableto debris can be or hasbeen problemswith items the aione both regulatorsand 5 control valves rising to a set pressureandremainingthere.Everyoneagrees Debris is most cause. \lhy both? Why all 3 diverter frrnctions?Why to the samepressure? 66 and 6z probably h.adthe sune

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years and not achievesucha unlikely to causeconsistentproblems.Mr Lehmker said you could carry out experimentsfor 100 and cannot explain fully all the mattersrecordedin the documents, result. iven if it requiresu -"*u." of humanincompetence, pressurewas derived from in it is much -o." probuble (or, as expressed evidence,the least improbable theory) that the noted be nearly closedthus prethe mini-accumulator boules (albeit wrongly set) and that the throttles were in effect set so as to some supportfrom the eventsin venting the system pressurereachingthe regulators.The possibility ofthis occurring derives of his own- As ruly t999 (seeparagraph 464).lvtr Marymei was not preparedto offer an alternative"least improbabletheory" from the RGVI and the debris later found in it may well have come from the for item 67, the replacement fitted in Januarycame there can be no doubt that in January 1999 RGVI or been the result ofinstallation. Thit ofcourse is not conclusive because to did believe that contaminationwas the causeofthe problems with items 66 and 67 and the proper reactionto it has Cameron items 66 and 67 but the questionremains be consideredin that context. As Mr Coull put it, Cameronwas chasing ghostswith whether and how they neededto be chasedat 19 January. to Nonethelessit remains in my judgment an unrealistic overreactionto advocatea strip down of the system.It was not thought ADC (paragraphs447 to 448 and 454 to 456) nor, indeed,by be required at the time Uy bu1n".on (paragraph443) nor by Amoco itself as the changein the terms of the letter of 20 January from those of the letter of I 5 January(Paragraph172), the recordsand evidenceof Mr Jonesand Mr price (paragraph 442),the fact that all on board on I 9 Januarybelievedthe rig was to Mr go to Arbroath, and Mr O'Brien's report of 20 January (paragraph 446) demonstrate. Marymee agreedthat he had never as ieard of a strip down being requiredLefore. His point was that he had never come acrossa systemas contaminated this one. prefei the view of Mr Ellis and those presentat the time. Mr Ellis said the level of thi problem. I I think that is to "*ugg".ut-" contamination was not unusual.He had seenfar worse. The flushing achieveda level of cleanlinessin the fluid considerably better than specified; repeatedoperationand testing ofthe system could be expectedto reveal any continuing problemsbefore (or the system *as requi.ed for potintial use in eamest; and changing out of those parts which had been shown to be affected being trappedin the systemcould be which might have been)had iaken place (item 76) or was planned.The likelihood of debris in consideredand addressed the caseof items such as item 76. But as Mr Leamanput it, supportedby Mr Ellis, "thesevalvesare functioning of the not very forgiving. If there is a damagedvalve it will tell you it is damaged".That is why repeatedsuccessful gives confidencein its integrity. It is also, I think, material that both Mr Ellis and Mr Poss(and Mr Quinn) systemlustifiably the that said (and I think it is commonsense) stripping down could itself causerisks in re-assembly; designofthe RGV was such that ii was possible to bypassthe manifold rlgulator and apply pressuredirect to the rams and that there were two setsof rams let (in addition to the Annuiar) available for any given size of pipe. That is not to say that it would be reasonable alone conor reasonablesuspicionthat an item of the well control equipmentwas defisistentwith ALARp to start drilling with a belief cient or that there was contaminationin the system. The needto ..pickle" piping to which Mr Marymee refers also needsto be seenin context. The purposeis to removerust from the inside of piping. Thi only piping onthe systemwhich could be subjectto rusting is carbon steel(or shipboard)piping- There was not u g."ui deil of such piping included in the system (Paragraph374). Moreover such evidenceas there is of rusting is to that it was no be found in Mr Leaman'snoie of 9 January(paragraph419). When he gave evidenceMr Leamanacknowledged "it looked like a rust deposit.It was brown in colour and had a gritty more than an assumptionon his part that it was rust because texture to it". Mr Leaman said, and I accept,that Mr Quigley was mistakento statethat rust was also found in the suction filter when it w-as removed: "it did not contain rust. It containedthe rype of debrisit is put thereto catch". There is no other document which refers to rust and not only do I think Mr Leaman would have recordedit if it had been found but I think his recollection was confident and truthful. That is a thin basis for concluding that the shipboardpiping required to be pickled. Moreover Mr Lehmker said flushing was the normal way to get contaminantsout of the system and there is no evidenceat all of any rust being found in the fluid after the flushing and replacementof the fluid. Indeedsuch evidenceasthere is showsthat it remained "clean" (paragraph461). In my judgment pickling was not reasonablyrequiredand Mr Marymee hasmoved too far from reality to theory in saying that it was.OperatorIssues As regards the well control systemthe views of Mr Bartle and Mr Posswere again divergent. Mr Bartle consideredthat the continuing risk of contamination even after the flushing meant "the complete operating system" had to be dismantledand They did agreethai the closing times were adequate inspected.Mr Possconsideredthat the flushing was a sufficient response. at 19 January. They did not agreethat an operator would willingly have acceptedtimes a few secondsoutsidethe API recpractice.\Ir Posssaidhe would; Mr Bartle said he would not. ommended

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his opinions on the reliability of the Mr Again, and understandably, Bartle had relied on the views of Mr Marymee in expressing agreedthat at 19 Januaryhe, as a well control system and what if any further work was required to makg it fit for purpose.He Mr Jones,Mr Price and Mr O'Brien and and prudent operator, would have taken into account the views of ADC, reasonable them and would not haveaccepted thoseof Cameronand Rowan/BAO. But when reminded of their views he said he could not and competence.It should not need to be said that all ofthose comand in some casesexpresseddoubts about their expertise rationally to explain why paniesand peoplehad the sameconcemsabout safety asthe Operator.But Mr Bartle was quite unable The fact is that Amoco operatorwould ever have got to the porition of consulting an expert such as Mr Marymee' a reasonable 56 andthe letter of 20 January,as on did not do so. Insofar as views were expressed the contaminationissuethey reflectedcAR issue particularly Mr Bartle came to acknowledge.I should record that I found Mr Bartle's evidence on the contamination poss realist[ally and sensibly said that to make a judgment you would have to be there at the time. Those unsatisfactory.Mr who were did so. They were well placedto do so. And in fact on my findings theirjudgment was right. power (pressuretesting, independent Mr Bartle acceptedthat none of the other matters in relation to the well control system hoses)would have been a reason for not allowing the RGV to proceedto the Arbroath platsupply, flo*meters and damaged at Arbroath: as form. The reasonbeing that iflhey did needattentionwhat was required would take little time and could be done ,.could have been sorted out in a short space of time". He had, however, describedthem as "major Mr Bartle put it, they problems" in his report.Conclusions to terminate the ln my judgment, the evidence establishesbeyond any serious question that if Amoco had not determined were any continuing problemswith the well control systemthey contract,the RGV would have gone to Arbroath and iithere testsor by the normal processof testing and would would havebeen revealedlerore oritting either by Mr o'Brien's acceptance the repair o. ,"pla""*"nt of parts as required in time for drilling to commencewhen the rig was othhave been resolved by to erwise ready to do so. Moreoier in fact, as I find, the problems were not even ofthe extent they appeared be. have No or no further strip down would have been sought. No problems which would have justified such an approach would thereafter oftwo orthree components revealed.Mr Ellis'opinion was thatthe combinationof flushing andthe replacement been than was a satisfactoryand appropriate way to addressthe contamination issue. I agree.The fluid was shown to be cleaner without problems. specified and the system had been repeatedly functioned I should perhapsadd, as the issuewas fully ventilated in the evidence,that even if, contrary to my findings, somefurther form that the systemwas fit for its purposewithout of ..strip bo*rri' had beenrequiredI am satisfiedit would readily have established of sample items in the process.Mr Ellis thought it would take some l0 the necessityof including more than a limited number job" it could days to carry out the 50il, procedureadvocatedby Mr Marymee, To strip the whole systemhe said was "a huge ..I thinl you could have built a new system in less time". That is the measureof what was put forward by have been done but "if is Amoco on this issue(despiteth" .o1;"rpondenceand documents)albeit the highestit is pul in its Closing Submissions that problem, a hazopand 3-{ weeks work would have seenthe end of it"' the BAO had been preparedto acknowledgeand address It is an important part of Amoco's sasethat "BAO's attitude" to the contaminationof the BOP systemwas itself repudiatory.I reject that iotally. As at 19 Januarythe only outstanding(and very recent) requestfrom Amoco was to be found in CAR 56. to Tirat also, as I find, reflectedthe views of Mr price expressed Mr Quinn. It is also reflectedin the 20 Januaryletter (paragraph (paragraph 457). lt is framed as a requestnot an inof ADC in fact thought even that unnecessary 172). Mr Mel Thomson If struction. BAO was right to consider a strip down of the whole or any part of the system to be unnecessary. Amoco had insisted on CAR 56 (or even a complete strip down) BAO would in fact have done it albeit whilst maintaining it was unnecor essary(paragraph 457).Had BAO itielf or Cameronthought it necessary desirableI have no doubt BAO would havedone it about the well control system on 18 January (paragraphs169 and 170) and 19 February in any irreni. What BAo wrote (paragraph201) was in my judgment both accurate and reasonable.Whilst Amoco rightly points outthat both le$ers were written on the basis that the contract subsistedthat does not mean that the reality of the context should be ignored, nor is it repudiatoryto asserryour case,but with or without being read in that context the terms ofthe letterscannot sensiblybe charthe them now which is also in somecontrastto how Amoco characterised first letter at acterisedas Amoco seeksto characterise the tinre (paragraphI 72).PRSiTrainingDescription

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A sufficient description of the PRS appearsin Paragraph20.The contract (Clause 6.2.1) required BAO to fumish properly trained, qualified and competentpersonnelin the numbersand classification set out in Appendix 3.Anoco's case Most of the allegations made by Amoco under the general heading of drill floor equipment were deleted in the course of the on only of the needto concentrate the areas presented deletionsas a consequence the trial. Although Mr Bames understandably of greatestimportanceand strengthin Amoco's case,in reality they reflectedthe overwhelming burdenof compellingevidence alreadygiven and evidenceyet to come from some 15 further witnesseswho, in the event,were not requiredto give evidenceon were acceptedby Amoco. It also reflectedthe expert opinion of Mr Wentzell instructed the basisthat their witnessesstatements on behalf of BAO. aB(8) and (10) of the claim) made by Amoco are only that: The remaining allegations(Paragraph "(8) (a) The automatedpipe racking systemcould not accessall the available rows. (b) The pipe racking system also suffered from control problems. On 25 December 1998 the PRS ran back to the end of the At track and crashedagainstthe derrick crossbrace. the Termination Date the PRS still required manualinterventionto enableit to pick up pipe. Personnelfrom Varco (the supplier of the pipe racking system) continued to work on PRS control problems both before and after the Termination Date. The Plaintiffserves herewith at Appendix B a schedulesettingout the work carried out on the PRS by Varco personnelbefween22nd December 1998 and 28th June 1999 as indicative ofthe stateofunreadiness and/or unfitnessofthe PRS. (10) The rig crew had not beenproperly trained on the PRS as installed on the Drilling Unit or in using such equipmentas part of an integratedsystem." Appendix B consistedof a list of extracts from service reports relating to the PRS together with the commentsof Amoco's expert (Mr Ulliott) upon them. However on 6 June 2001 (having informed Freshfields Bruckhaus Deringer on i 8 May) Herbert Smith informed the Court that Mr Amoco did not intend to call Mr Ulliott to give evidenceand did not wish to cross-examine Wentzell. On 15 JuneHerbert 4(EXb) of the Statement Claim". The of to explain "how this affects our caseunder Paragraph Smith wrote further to the Court explanationwas that: "we now accept that these (control issues) were minor and were resolved by 7th January (as stated in paragraph7.16 of Wentzell's report). We do not rely on any problems after that date. Control problemsremain in the caseonly for their effect on training. We would add (if it is not already clear) that this is now the main focus of the Prs caseas a whole." What that comesto is that control problems with the PRS are only relied upon insofar as they can be shown to have made the trained to be ableto useit. Amoco also accepts PRS unavailablefor training the crews and the crews were not in fact adequately that what is left ofthe caseunder this heading cannot be relied upon to supportany caseunder Clause28 nor can it amountto a repudiatory breach of the contract. It is relied upon only, so it is submitted,as adding weight to the other issuesin the latter context.TheEvidence It was the evidenceof Mr (Bryan) Quinn and really all those who had beenin seniorroles on the rig that whilst "minor glitches" remained in the PRS after 19 Januarythere was nothing which would have preventedthe rig from drilling. The evidencewas wholly compelling. Belatedly Amoco have in effect acceptedit, albeit doing so involved a departurefrom the burden of the at song of at leastsome ofthe evidenceadducedby Amoco and from what was said by Amoco in correspondence the time. for example in the letters of4 and 8 January (Paragraphs154 and 156). In the context oftraining, the evidenceis unchallenged (from Rowan/BAO and Varco) that Varco personnelwere to be presenton the rig when it first went to work drilling at Ar-

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thoroughly and to assistthe crewsin broath. The purpose was two-fold: to ensurethat any further glitches could be addressed pRs should they needit. Mr Gray (and others), supported the documentsand the evidenceof Mr Cowie, by the operationofth" by attended describedthe hands-ontraining given to the crews at SabinePassand instructionon a simulator at Varco's "school" (5 of whom wire &illers or assistantdrillers) before the rig left America. Some of the crews were also in7 crew members in a drilling situation; volved in the commissioningand installation ofthe PRS at Sabine.Mr Snow was confident about using it who were to run it; primarily the Assistant Mr Gray was comfortabte tiittr the way the equipment was run and so were those and "hand-picked" Drillers. Mr Lanier (an experienceddriller) aiscriuea (rightly on the evidence)the crews as experienced getting startedott ro*ithing new. Mr Sykesin particular said much the same.operation of who were excited at the prospectof and were the pRS was easyto leam; iiwas perfo.-ing automatically functions with which the operatorswere wholly familiar its main purposewas basic to any drilling operation.The PRS was not rocket science;it was not complicated;it was repetitive; put it, the PRS"is a simply ..tripping pil"';, tt ut is to take standsof pipe and hand them over to the well centre.As Mr Edwards manual operation" done by them on every rigtoof assisting(the crew) to carry out what previously was a driller) was also confident that he could operatethe PRS properly after doing so whilst the rig Mr Morton (another experienced was in Rotterdam. He said it was working correctly after it was repairedfollowing the collision with the denick on Christmas (an day. Mr perkins and Mr Devaney said th" .a*", "sure we had room to improve and we w1s going to improve"- Mr Barker would come Assistant Driller) was 100% confident he could usethe PRS safely and efficiently whilst acknowledgingthat speed of with time and experience.Mr Walker ( Amoco) is on record at 24 Decemberas acknowledgingat leastthe basiccompetence the Drillers and AssistantDrillers to usethe equipment' alter the "diving board" had been levelled up, that it was found that the 5 slots on the 6 5/8 " pipe racks It was on 2 Jarwary, furthest from the diving board were too narow to allow pipe held by the PRS to reachthem and that all 11 slots in row one of the 5" pipe racks (also the farthestfrom the diving board) could not be reachedeven with the maximum availablearm extension. ftre diving board, as its name perhapsimplies, is a walkway high up in the derrick running betweenthe two setsof racks to with a spaceo.,lith". side to permit access the racks for pipe held either by the PRS or manually. Mr Quinn pointed out that in the problem had not been put right to this day but the rig had successfullydrilled a well and severalabandonments Canada. there the rig to drill in Arbroath because to The unchallengedevidenceis that the slots were in any event not necessary enable respectively each holding 90 feet of pipe) without them to store the was more than sufficient capacity (144 antl 198 slots maximum length of pipe required.Further,even if they, or at leastthe I I 5" slots,had beenneeded,all that was requiredwas to send a man up the derrick to operatethem manually. Much of Amoco's caseon training derived its focus from an internal record made by Varco of a meeting with Mr Snow and others on behalf of Rowan held on 2 F"b.rlury 1999 when the RGV was at Dundee. It is recordedagainstthe title "Training" that : ..The need to utilise the time available in the shipyard to ensurethe correct operationof the equipment and the competence of All the personnelwas discussed. presentat the meeting recognisedthe needto implement a structuredtraining programmefor technical and operationalpersonnel.Almost none of the presentcrews have previous experienceof operating or maintaining the semi-automat"dd.illing systems.Various options were put up for discussion, generalfeeling being that the mechanicaland personnelshould be scheduledto attend Varco Systemscoursesfor maintenancepersonnelheld at Varco Montrose. electrical Operational personnel would also attend a theoretical classroom basedcourse and then undergo practical training and asthe sessmenton the safe operation of the equipment. Upon successfulcompletion of the operational assessment operators equipmeni (driving licence). Varco will presenta would be issued with a certificate of competencyin safe operation of the scheduleand costing for training as outlined above." Mr Quinn's responseto this documentwas typically restrained.Others were more forthright. Mr Quinn agreedthat the crews had more to leam, but the 4 Assistant Drillers had each been sufficiently trained to drill and the best way to leam was from experiencein using the pRS to dritl. He said that after the contract had beenterminatedthe rig was idle in Dundee,Varco was basednearby at Montrose and Rowan/BAO took the opportunity to train "everybody" including roughnecks,mechanicsand electricians.Mr Marcom thought it was good businessfor Varco. The "driving licence" was a new schemebeing introducedby Varco.

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the Mr McKenzie (Varco) said that at 19 January AssistantDrillers were definitely capableof drilling a well usingthe PRSwith Varco presenton board. That is supportedby an intemal report he made on that day. Mr Fenton, also of Varco, said that whilst he would not say the AssistantDrillirs *ere fully trained they were competentenoughto drive the PRS and startdrilling awell. Mr Hewitt condrmed the same.He said the training after 19 Januarywas mainly for mechanicaland electrical maintenance. It The evidenceto which I have referred was wholly unshaken in cross-examination. leaves me in no doubt at all that those job it would have been to operatethe PRS had the RGV been allowed to drill at Arbroath at any time in January1999 whose would have been comfortable and tompetent in doing so. The presenceof Varco personnelwould have provided addedcomfort. The intelligence and ability of thapersonnel was apparent.Their confidencewas compelling and transparentlyhonestif not understated. which shouldbe recalled.First the contract(Appendix 10) containedspecificprovisions There are other material considerations for a variance in the rig rate ifthe PRS did not operateor operateproperly. In the sole caseofthe PRS the reductionwas to be $5000 (in the other casesit was $15000) : see Paragraph95. That is some measureof its sigrrificancein the context of the overall performanceof the RGV. On the evidence,the level of reduction reflectsthe fact that even without the PRSthe crew on the rig were wholly familiar with and capable of moving drill pipe to where it was intended to go, and torquing it up or untorquing it as required. The main advantagesof automation *ere repeatability and (to a limited extent) safety on the drill floor rather than any time saving in drilling. Even in the context of escalatingdisputesaboutthe rig rate and delay and the complaintsabout the drill floor equipmentmade generally in the lettersof26 December(paragraph152) and4 January(paragraph154) and madegenerally aboutthe PRSin the ietter of 8 January (paragraph 156) Amoco authorisedthe rig move to Arbroath on 7 January. Belatedly (paragraph496) Amoco has also acceptedthat issuesabout the operability of the PRS were minor and in any event had been resolved by 7 January. Despite Mr Gillis' protestationsthat it would have been unsafeto train or to complete the training of the rig crews whilst the rig was jacked up alongsidethe Arbroath platform the fact is that he authorisedthe rig to go to Arbroath, weather permitting, when he knew or certainly had the meansof knowing the stateofthe crew training at the time.Expert Opinions much room for expert evidenceon this subject. The burden of Mr Munter's There was not, in view of Amoco's concessions, problems,which were due to installation errors,the PRShad not been"commissioned" evidencewas that becauseof the access at 19 Januarybecauseit was not mechanicallycomplete. I found that neither relevantnor realistic. The expertswere agreedthat in terms of time there was little to choosebetweenmanual and automatedoperation.Nor was there any challengeto the eviby dencethat for Arbroath there was no needto usethe 16 slots which could not be accessed automatedoperation.Mr Munter's and Mr Edwards'views concernsabout the safety of manual operationand generally were, in my judgment, greatly exaggerated problem "was not a significant much more realistic and to be preferred.Mr Bartle and Mr Possformally agreedthat the access the "you have short-changed issue". They were plainly right on the evidenceto do so. Yet Mr Munter would not agreebecause stood by the opinion expressedin his secondreport that the rig was not fit for drilling opman that is renting the rig" and he erations on I 9 Januarybecauseofthe accessproblems alone. That, I think, was to seekto sustainthe obviously unsustainable. Both Mr Bartle and Mr Posssaid they would probably have acceptedVarco'sviews aboutthe PRS and training. It was not even suggestedto relevant witnessesthat the accessproblem had any effect on training. Indeed both Mr Quigley and Mr Bartle the that because HSE would haverequireda documentedrecord or demonstration acceptedthat it did not. Mr Bartle did suggest would he. But the COSC (approvedby the HSE, paragraphI l9), simply provided that Rowan would ensure of the training so the crews were trained by the vendors and by hands-on-trainingas well as by their presenceduring installation and commissioning and runnin-sthe equipment. Mr Bartle was adopting a fastidious approachwhich the COSC did not. There is no suggestion in any document or evidence that the HSE had any concern about Rowan/BAO's ability to assesscrew competence.Co nclusion at In my judgment there is no substance all to Amoco's caseconcerningthe PRS and Training. Overall Conclusions

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of It is Amoco's basic casethat at 19 Januarythe RGV was unsafeand unusablebecause two "show stoppers": i) The history of events conceming the jacking systemwhich "called for a full investigationin order to determinethe integdty of the system and the risks ofjacking alongsidethe platform" and BAO's responseto and explanationsof the events which it is allegedwas inadequateand inaccurateinsofar as it was communicatedto Amoco; and ii) The well control system which was contaminatedand could not be relied upon to prevent a blow-out that could have led to disaster.It should have been stripped down and BAO refusedto do so. It is also Amoco's casethat the delays and lack of crew training are part of the backgroundwhich madethe show stoppers"all the more seriousin their effects, and contributedto Amoco's loss of confidencein BAO". to Amoco's casefails on the facts at every point. But for termination, the jacking systemwould readily have been established be (as it was) both safe for Arbroath and indeedcapableof meeting its performancecriteria had that been thought material-In all probability the jacking system would have beenproved by performance.So also the well control system,at leastwhen first required for use, would have been shown to be fully and safely functional. Indeedthat was the caseon 19 Januarysavethat the Mr pressurecontrol problems manifested at items 66 and 67 neededto be resolved"prior to spud". The rig would have passed In O'Brien's tests or the tests would have revealed any continuing problems which could readily have been addressed. no relevant sensedid BAO behave "intransigently" nor refuse to carry out work nor provide inaccurateinformation. Whilst Amoco's caseof loss of confidence is I think contrived it was certainly not justified. The complaints about delay and crew training have no contractual relevance nor do they have any place in the context ofrepudiation or otherwise. Even had I acarguablethat no repudiationhad occurred. ceptedAmoco's factual and expert casein its entirety it would have been reasonably That caseat its highest is that some 6 weeks to 3 monthswould have beenrequiredto put the mattersnow complainedof right and to establishthat the RGV was (as it was) safe and fit for drilling at Arbroath. Moreover there was good reasonto believe as that such would be the outcome of any further work. The contaminationwould have been addressed Amoco claim it should test. ln the context of have been.Thejacking system would have been expectedto passand would have passedany reasonable a drilling opportunity limited to some 772months it must I think be very questionable a 12 month contractualcommitment but whether even such circumstanceswould meet the test of repudiation. Be that as it may on the facts as I find them to be such a caseis ofcourse hopeless. There was in addition no rieht to terminate the contractunder Clauses23.1.1 and 28.1.d) at leastbecause: i) As regardsthe well control system BAO did not fail to conduct its operationsin a diligent skilful and workmanlike mannernor could Amoco reasonablyhave concludedthat it had; notice was given by Amoco of any such failures now relied upon; ii) No adequate iii) BAO did not in any event fail or refuse to remedy any failure or to proceeddiligently to do so within the meaning of the Clauses. There was no right to terminate under Clause28.1.b) at least because: i) The 30 day period had not expired; ii) No relevantbreakdown had occurred; test on 16 January. iii) In any event the well control equipment was not broken down at 19 Januaryfollowing the successful Remedies that there is no defenceto the counterclaims As I have found that Amoco was not entitled to terminatethe contractit is accepted for the secondhalf of the mobilisation fee and the costs of mobilisation from Rotterdamto Arbroath. I have also rejected Amoco's claim to apply the "no remuneration" provision following the "failure to test" of the BOP on 24 Decemberas a matter "failed" did not resultin the suspension of of constru:tionof Clause5.4 (Paragraphs to 50). The testsrvhichAmoco alleges 4E

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operations.Amoco also submitsthat "if it is held that the rig was not in a fit stateon and from arrival in Rotterdambut that (for '1he period until the rig was some reason)Amoco was not entitled to terminate" it should not have to pay any day rate for ready." The basisfor this unusualif not remarkablesubmissionis the decision in Sonatv AmeradaHess F9E8] I Lloyds Rep 145 , the that consequence ifthe to fact that the rig rate was expressed be payable for services(Clause 5, paragraph42) andthe asserted perform those servicesthen the rate shouldnot be paid. The submissionignoresthe fact that the partiesagreed rig was not fit to ofthe rig rate contract to govem their relationship which provides specifically for the abaternent a detailed and comprehensive (including in effect a nil rate) and for Amoco to terminatethe contract which for the purposesof the submissionmust be assumed not to assistAmoco. It also igrroresthe fact that Amoco does not claim to have suffered any damageas a result of any breach of contract (let alone negligence) by BAO on the basis (as must again be assumedfor this purpose)that it was not entitled to terminate the contract. Both the circumstances and the relevant contract terrns were very different in Sonat , and in my judgment substantivelyso. In any event I have in ef|ect held that at all relevanttimes BAO was ableto provide and perform relied upon in Amoco's the substantialservicesrequired of it under the contract.The rig was never "out of action" in the sense submissionor which occurred in Sonat as a result of an explosion. Amoco does not contend (rightly in my judgment) that BAO is otherwise not entitled to the "standby" rate for which it claims for (in effect) the period of one year. I shall leave it to the partieson receipt of this judgment in draft to considerthe terms of the precise ordersto which it gives rise and, if they cannotbe agreed,will considerthe issueslater when thejudgment is delivered. END OF DOCUMENT

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