Rosneft Cancels $1b Lease Contract

Rosneft Cancels $1b Lease ContractRosneft Cancels $1b Lease Contract

State-owned Russian oil company Rosneft canceled a $1 billion lease contract with North Atlantic Drilling Ltd, RIA Novosti reported.

Rosneft's decision thus reduces the value of its portfolio backlog with North Atlantic Drilling, previously estimated at $4.1 billion. The cancelled order involves a five year service contract for use of the West Navigator drillship, which had been scheduled to commence drilling operations this summer.

It has been reported that the West Navigator will be marketed elsewhere, while Rosneft and North Atlantic Drilling look for "alternative paths for future cooperation."Rosneft and North Atlantic Drilling had signed a contract stipulating long-term cooperation in May 2014, with long-term lease agreements for drilling equipment suited to harsh climatic conditions planned up to 2022.

The contract anticipated that Rosneft would acquire a significant stake in North Atlantic Drilling, with the latter entering Russia's onshore drilling market, and the signing of long-term contracts for onshore and offshore drilling. The contract included provisions for six offshore drilling rigs, anticipating up to nine rigs in the future.

Details about the motivation behind the termination of the contract were not provided, although North Atlantic Drilling had earlier stated that it anticipated challenges in closing its transactions with Rosneft according to agreed upon timeframe and terms.

North Sea Drilling Ltd's fleet consists of nine drilling rigs, including five semi-submersible rigs, a drill ship and three jackup rigs. The company is 70 percent owned by Bermuda-incorporated, London managed Seadrill Limited.