![COLUMN | Unlucky for some! Scotland’s Ferries; Argentina’s YPF Nationalisation; SBM sued by whistleblower; BP’s CEO quits [Offshore Accounts]](http://media.assettype.com/bairdmaritime%2Fimport%2Fwp-content%2Fuploads%2F230918-Offshore-Accounts.jpg?w=480&auto=format%2Ccompress&fit=max)
This week was a great week for Transocean – the company announced it had secured a three-year award for the newbuild ultra-deepwater drillship Deepwater Aquila with Petrobras for work offshore Brazil starting next year on a day rate of around US$443,000 plus 90 days' worth of mobilisation fees. In 2021, Transocean bought the rig for US$200 million with co-investors. Now the rig has a long-term contract at a good rate, Transocean has bought out its partners, and there are rumours that the sister rig, the former West Libra, which was also abandoned by both Seadrill and Northern Drilling, will soon be sold by the same Korean yard, too.
But if Transocean had reasons to smile, others were not so fortunate. We have Scottish ferries with safety defects and investigations into missing millions at the shipyard on the Clyde, massive legal losses for Argentina after a botched oil company nationalisation, a new lawsuit against SBM Offshore from a very angry and aggrieved former member of staff and… yet another BP CEO resigning after a sex scandal.
The sad saga of Ferguson Marine's total failure to deliver two ships to Scotland's state-owned ferry operator has filled many pages of the national press there, as well as in this august publication, consumed many hours of time in the Scottish parliament, and cost Scottish taxpayers many hundreds of millions of pounds. The final bill for the ships is likely to be closer to US$450 million, compared to an initial contract award of US$120 million.
The yard went bust, significant funds are unaccounted for, the tendering process seems to have been run in a shambolic manner, and the residents of the Scottish Islands are furious at the frequent breakdowns and low levels of reliability from the aged ferries forced to continue serving their communities due to the delivery delays of the newbuildings. It is a total fiasco.
Firstly, I would love to report some progress, the second ferry, formerly known as Hull 802, now has a name: Glen Rosa. It is likely to be "only" five ten six years late delivering from the ill-fated yard on the Clyde at the end of next year, whilst its sister vessel Glen Sannox was expected to enter service, also six years late, before the busy summer tourist season in 2024.
Sadly, but not surprisingly, it now it turns out that neither vessel may be delivered even to the massively delayed building schedule, The Herald reported last week.
The problem lies with safety defects in the interior fit out. The flag state regulator in Britain, the Maritime and Coastguard Agency (MCA), inspected the vessels and determined that some stairways and doors within were not wide enough and were therefore not compliant with rules for emergency evacuation. Until these defects are resolved, the vessels cannot sail.
The yard has been at pains to play down the severity of the problems, assuring the BBC that no cables need to be re-routed and that simply cutting steel should solve the problem. At Ferguson Marine, however, nothing has ever been simple with these ships, one of which was even launched with painted-on bridge windows instead of glass.
The MCA defect finding means that the sea trials of Glen Sannox have been delayed until an unspecified date in the first few months of next year. By now, despair is the dominant emotion associated with these ships. The latest problems will inevitably raise the cost of the vessel and increase the delays.
Worst of all, nobody knows how the ships, which have been over eight years under construction, will perform when they do finally go on their sea trials. We should probably be braced for all manner of technical gremlins emerging when the engines are run at full speed, the propellers and thrusters are churning, and all the long-dormant systems on board are tested properly in an operational situation.
As the bill gets ever larger for these two blighted vessels, the Scottish Government is stepping up efforts find where over US$150 million of taxpayer funds, for which the shipyard cannot properly account, have ended up. These were the funds paid to the yard when it was privately owned by Scottish businessman Jim McColl before it plunged into bankruptcy and had to be rescued by the state at further cost.
Public watchdog Audit Scotland now says it needs special authority to investigate how Ferguson Marine spent over £128.25 million (US$159 million) of public money paid out for the building of two ferries before it went bust. The Herald's excellent Martin Williams has highlighted that Audit Scotland does not have the statutory powers to undertake a forensic analysis of Ferguson Marine's records, because the private shipyard was not a named body subject to public audit scrutiny under the Public Finance and Accountability (Scotland) 2000 Act. Basically, nobody then foresaw that anyone would be idiotic enough to advance a private business US$150 million to build some ferries without correct skills, oversight, and accountability in place.
Audit Scotland has said that ministers have to make a special order to make Ferguson subject to its authority. The Scottish Parliament's Public Audit Committee has now made that request to the so-called "wellbeing economy secretary," Neil Gray. Honestly, anyone would think there was something to hide in this dismal fiasco.
And that comes on top of an 18-3 defeat to South Africa in the Scots' first game at the Rugby World Cup.
Another team starting badly in France were Argentina. As if losing 27-10 to England in their Rugby World cup opening pool game wasn't bad enough, Argentina also lost a US$16 billion (with a "b") lawsuit in the American courts over the country's decision to nationalize YPF, the country's largest oil and gas company, more than a decade ago.
Despite its vast natural resources – including offshore gas fields operated by TotalEnergies – and huge onshore reserves in the "Dead Cow" shale area, Argentina has been an economic basket case for years. The country has suffered regular defaults on its foreign debt, devaluations to its currencies, nationalisation and expropriation of foreign businesses, and bouts of inflation, not to mention the regular political instability, the endemic corruption, and the occasional assassination and rioting.
What was once one of the richest countries in the world one hundred years ago now ranks on a par with Malaysia, Mexico, and Montenegro in terms of income per head, firmly trapped in middle income status. Argentina is a reminder that without good government and strong institutions, countries may not deliver benefits to their people from their new hydrocarbon resources (as we have seen with like Guyana, Namibia, and Mozambique).
In 2012, then-President Cristina Fernández de Kirchner decided to nationalise the Argentine oil company YPF from Spanish energy company Repsol and other minority shareholders. She claimed on television that this was needed to "safeguard the hydrocarbon sovereignty" of her country, saying that it was the fulfilment of her ruling family's "life-long dream."
Last week, the dream turned sour when a New York court awarded a record US$16 billion in damages and interest to two minority YPF shareholders who were not compensated when their shares were seized. Repsol had received some Argentinean government bonds for its majority stake (Lucky them.), but the others got nothing. The litigation against the Argentinean government was financed by a company named Burford Capital, which paid the legals bills for the claimants in return for a percentage of the award, believed to be US$6 billion if the company can collect against Argentina. That's a big "if."
The Financial Times reported that Argentina, a country of only 45 million people, owes almost US$422 billion, mostly to local bondholders and the International Monetary Fund, before the latest US$16 billion YPF claim. Worse, around US$126 billion of this debt is due for repayment by the end of 2024. The country said it will appeal the award, saying that the claim should be litigated in the Argentinean courts (Good luck there.), even though YPF was listed on the US Stock Exchange before it was seized.
Whether Argentina can pay and how the judgement will be enforced are not clear. Cristina Fernández de Kirchner was found guilty of corruption and fraud last year and has been sentenced to six years in prison and given a lifelong ban on holding public office. She is in the process of appealing the US$1 billion fraud conviction related to public works contracts, and she maintains her innocence.
The only offshore company to profit in Argentina's sad decline seems to be DOF, which has had the light construction vessel Skandi Patagonia on charter supporting Total's offshore fields near Punta Arenas in Patagonia for over two decades.
Bad government and corruption mean that an offshore renaissance in Argentina is unlikely.
One tale that has run even longer than the Scottish ferries story is the story of whistleblower Jonathan Taylor's struggle with his former employer, floating production giant SBM Offshore. Mr Taylor blew the whistle on US$240 million of bribes the company was paying in multiple jurisdictions over many years, the company was eventually fined over US$840 million and its former CEO jailed in Texas, and Mr Taylor was then detained in Croatia under an Interpol red warrant issued by Monaco, and eventually released without charge in July 2021.
Now, he has struck back at SBM, issuing a writ that was formally served on SBM Offshore, Bruno Chabas (the current CEO of SBM), and Sietze Hepkema (the former Chief Governance and Compliance Officer of SBM) on Friday, September 15. Mr Taylor is suing SBM in the Dutch courts for damages and costs.
He claims the company and the individuals he named in the lawsuit "frequently and unfoundedly publicly labelled [him] as an extortionist or vulgar blackmailer for a decade before and after wrongly reporting [him] to the prosecutor in Monaco for attempted extortion (2014), failing in its attempt at suing [him] for defamation (2015), procuring a charge over the family home in France (2015), and causing [him] to be arrested under an Interpol Red Notice, jailed and then held against [his] will under house arrest in Croatia for 50 weeks (2020/1)."
We have highlighted before how many whistleblowers end up like heroic Russian lawyer Sergey Magnitsky, dead in prison, and others are left destitute or divorced. Mr Taylor says that his family life, his career, and his well-being were wrecked after he exposed the company's malfeasance to the authorities.
"This time I am in search of justice on a personal level," Mr Taylor wrote to us. "As well as an award of substantial damages and the return of the costs I have incurred predominantly in defending myself against the convicted blue chip Dutch multinational, I am seeking a public apology from SBM as part of a rehabilitative process. SBM was wrong to publicly call me a blackmailer. I never was a blackmailer. The Monaco First Instance and Appeal Court adjudged that I didn't have a case to answer to even be charged with anything at all, and its ruling is final. I am a whistleblower. I should never have suffered in the life-changing ways that I have, for being just that. These wrongs must be set right."
Therefore, he is taking SBM, Mr Chabas, and Mr. Hepkema to court in the Netherlands. As we have observed with legal tribulations of offshore construction company McDermott International, the wheels of justice often grind very slowly and very expensively. We will keep you posted.
Last week, BP chief executive Bernard Looney resigned from the company with immediate effect. His career mirrored that of his predecessor John Browne, now Lord Browne of Madingley. They were both BP lifers. Browne joined the company in 1966 as apprentice, and worked his way up to become CEO in 1995, whilst Looney joined BP in 1991 aged 21, after completing his Master's degree at Stanford, and he became CEO in 2020. They were both advocates of renewables, much more so than their peers at the other big oil companies, or their immediate predecessors at BP. Browne dubbed BP as standing for "Beyond Petroleum" and oversaw the investment of over US$8 billion in renewables, especially solar, symbolised by the adoption of a sunflower as the company's corporate logo during his tenure.
Looney also tried to pivot the company back into renewables. After the oil price crashed in 2020, Mr Looney announced a radical transformation of BP's strategy. He declared that BP would increase its yearly renewables investment by 1,000 per cent to around US$5 billion by 2030, with an ultimate goal of increasing its total renewable generating capacity twenty-fold to 50 GW in 2030.
The company became an aggressive bidder in offshore wind auctions, winning new projects in the UK, and buying a half share in Equinor's 4.4GW Empire Wind and Beacon Wind projects off the coast of New England in the US. His resignation now throws open to question how vigorously his successor will pursue his greener, cleaner vision.
Ultimately, Lord Browne was brought down by a rather inconsequential lie in a written statement submitted to court in the UK. He had stated that he had met his former lover Jeff Chevalier in a London park, rather than on a fetish website, as he attempted to block publication of details of the relationship by Associated Newspapers, publishers of the tabloid Daily Mail. When the untruth was revealed to the judge, Browne stood down immediately after 13 years as CEO of BP. He had spearheaded the company's acquisition of Amoco and Arco in the US and catapulted BP into the big league. "It is an ignominious end to a glorious career," as one analyst told Reuters at the time.
After Lord Browne's resignation, one might have expected future BP CEOs to be more aware of the risks of their personal relationships to their careers. "In my 41 years with BP, I have kept my private life separate from my business life," Browne said in a statement back in 2008. Not so, Mr Looney.
Last week, he, too, resigned as CEO after he admitted that he had failed to disclose the extent of past intimate relationships with colleagues in BP. In 2022, he had been investigated by the company's board for a relationship with a female colleague who did not report to him. The board had asked him at the time to disclose other sexual relationships he had had with BP colleagues.
The company's press release gave the following details:
"During that review, Mr Looney disclosed a small number of historical relationships with colleagues prior to becoming CEO. No breach of the Company's Code of Conduct was found. However, the board sought and was given assurances by Mr Looney regarding disclosure of past personal relationships, as well as his future behaviour."
Imagine the board's surprise when a new allegation of another relationship by Mr Looney with another female colleague reached them. BP said that Mr Looney "did not provide details of all relationships and accepts he was obligated to make more complete disclosure." He resigned.
Nobody has claimed that Mr Looney was doing anything wrong in his relationships with his colleagues, or that he unfairly privileged or promoted them. Unfortunately, when you are the CEO, sex with your colleagues, who by definition are ultimately your subordinates, is rarely going to end happily, especially if you are caught lying to cover it up. Like Lord Browne before him, it was Mr Looney's failure to make correct disclosures about his private life that finished his career.
I was speaking to a leading warranty surveyor on what ESG (environmental, social, and governance) meant in the context of a ship some months ago. Environmental was clearly about emissions reductions and MARPOL compliance, we agreed. We decided that the social element was about crew welfare, pay, and employment terms. Governance was harder in a maritime context, he said, but "it probably means that the captain is not screwing the cook".
The fall of Mr Looney comes as it does after the firing of the CEO of McDonald's, Steve Easterbrook, in 2019 for "screwing" several of his colleagues and lying about it to the board investigators, too. There's never been a better time not to make advances on your colleagues, even if entirely consensual and enjoyable for all concerned, as Mr Looney's and Mr Easterbrook's appear to have been.
When it was suggested that his wife was having an extramarital affair, the Roman ruler Julius Caesar supposedly divorced her, saying that, although he knew nothing of the affair, "Caesar's wife must be above suspicion."
So too at work, whether you are the CEO of a major oil company, the captain of a ship, or the general manager of a crewing agency, sometimes it is better for everyone if the boss is not having intimate relations with any of their colleagues. Leaders should always be above suspicion, and lead by example. In the case of Mr Looney, losing his US$12 million job, the price of failure probably wasn't worth the moments of shared passion. Not with any of them. Mr Easterbrook, meanwhile, had to pay back a mind-blowing US$105 million in pay, benefits, and stock options after McDonald's sued him, accusing him of lying, concealing evidence, and fraud. Ouch!
Background reading
As a reminder on the Scottish Ferries Fiasco, see our coverage from March on the Scottish Parliament's Public Audit Committee report into the whole sorry affair.
