Jobs in balance as rigs company looks to East

Jan 24 2009 by Graeme King, The Journal

THE creation of hundreds of North East jobs is hanging in the balance after the company behind a £300m contract to build oil rigs said it was moving the work out of the region.

SeaDragon Offshore agreed two years ago to have the rigs built at the Haverton Hill shipyard in Billingham, and signed a contract with the Tees Alliance Group (TAG) of companies to complete the work.

The huge contract was expected to create up to 800 jobs in TAG, and many more in the supply chain.

Now SeaDragon says it is terminating the contract and it is understood the company wants the rig construction work to be completed in Singapore instead. But the head of TAG, David Eason, said yesterday there were no grounds for the contract being broken and he was seeking legal advice on how to keep the work in the North East.

While SeaDragon claims it tried various options to keep its valuable contract on Teesside, the companies involved are concerned that the main issue is cost and SeaDragon believes it can complete the rigs contract more cheaply in the Far East.

Mr Eason said: “This is an extremely difficult situation. We can confirm that SeaDragon are attempting to terminate their agreement with us. They are also refusing to pay us funds which are due.

“SeaDragon is basing its attempt on the claim that we are in breach of our contract with them. This is untrue.

“We have the capacity, the capability, and the facilities to carry out the work as agreed.” Mr Eason also said the Tees Alliance Group had unfortunately had to warn its employees that they could face redundancy, and that this was “entirely due to the actions of SeaDragon.”

He also said the alliance was in negotiations to secure other, unrelated projects to provide work for its staff. It is not known yet whether TAG has completely stopped work on the SeaDragon contract, but it is expected there will be a break in production while Mr Eason gets advice on SeaDragon’s actions.

A spokesperson for SeaDragon Offshore said: “SDO worked extremely hard over a number of months to explore various alternative options which may have enabled the rig to be built on Teesside.

“Unfortunately, it did not prove possible to achieve that outcome and with great regret SDO concluded that in order to ensure the continued success of the project it had to exercise its termination rights and terminate the contract with TAG.”

SDO said it had invested $150m in Teesside and hoped this would help to bring future projects to the area.

Companies involved in the Tees Alliance Group include Cleveland Bridge from Darlington, Sarens Cranes from Middlesbrough and Mech Tool Engineering from Darlington.

Stockton North MP Frank Cook has called on Prime Minister Gordon Brown and business minister Peter Mandelson to intervene to help TAG as so many jobs rely on the SeaDragon contract.

Manufacturing body EEF Northern said yesterday the business case for switching work to the Far East was not proven and many companies which had attempted to do so in the past had incurred much higher costs than expected.