Damage assessment begins after SeaDragon blow

Mar 25 2009 By Jez Davison

AS businesses woke this morning to news that the multi-million SeaDragon project was now dead in the water, the tough job of assessing collateral damage in the supply chain began.

Lead contractor the Tees Alliance Group and commissioning company SeaDragon Offshore Ltd look likely to be locked in legal stalemate following Offshore’s decision yesterday to take the rigs to Singapore.

But sources said the project had already generated £50-75m for local suppliers - less than half of what Tees Valley could have expected from building one of the two rigs at Haverton Hill shipyard which reopened on the back of the project 386 days ago on March 5, 2008. The work has also safeguarded an estimated 1,200 jobs.

Commissioning body SeaDragon Offshore Ltd yesterday confirmed the building of the giant drilling rigs would take place in Singapore despite a last-ditch effort by the Tyne Tees Rigs (TTR) consortium to keep the project in the region.

TTR mounted an eleventh hour rescue bid after SeaDragon terminated its contract with the Tees Alliance Group (TAG), the cluster of companies originally commissioned to carry out the work.

TTR, a consortium between Darlington-based Cleveland Bridge and McNulty Offshore in South Shields, described the announcement as “a body blow to the region and the UK’s offshore construction industry”.

Director Jon Dale said: “We are bitterly disappointed that we didn't get a fair crack of the whip as we were never given the same information as that provided to the Singapore yards.

“We had to use our experience and industry knowledge to compete with Singapore with what at times felt like having one hand tied behind our back.”

TTR also questioned whether UK taxpayers’ investment in Lloyds bank should be used to benefit foreign companies and foreign workers. Lloyds is 65% owned by the Government and a debt provider to SeaDragon Offshore.

SeaDragon said the decision had been based on risk rather than “costs, skills or commitment” and that contractors would be paid for work carried out so far.

TTR member Cleveland Bridge said the North-east would have been the best place to build the rigs. The company, famous for its construction of the Tyne and Sydney Harbour bridges and Wembley Stadium, stands to lose millions of pounds of potential revenue as a result of yesterday’s announcement.

MD Brian Rogan said: “For financial, risk and programme reasons we were better than Singapore. The least risky option would have been to carry out the work out in the region.”

SeaDragon’s plan was to reduce risk in the project by locating a yard “which has a recent, successful track record of building semi-submersible rigs of this complexity, under the supervision of an industry-experienced project manager. On this basis the Board concluded that the TTR proposal could not be taken forward.”

PAGE TWO: Comment on SeaDragon from the Evening Gazette's Jez Davison.