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Marine Log

February 21, 2008

Odfjell cancels Sevmash contract

Claiming "willful misconduct and massive contract breaches by the yard," Odfjell is canceling contracts with Russia's Sevmash shipyard that were placed In 2004. They covered construction of up to twelve 45,000 tdw IMO type II coated product/chemical carriers.

The initial fixed total contract price for all twelve vessels was approximately $500 million, later increased to $544 million.

"Following serious delays in the construction process, combined with demands for further price increases from the yard, continuous cooperation problems as well as protracted negotiations," says Odfjell, it "decided today to serve formal notice of cancellation to Sevmash. The instalments already paid are covered by standard refund guarantees from international banks. Odfjell will further claim full compensation for its costs and losses caused, on account of wilful misconduct and massive contract breaches by the yard."

Unless the matter is solved amicably between the parties, the issue will be solved by arbitration in Sweden, as provided for in the contract, says Odfjell.

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