Conflicts Arising From Corrosion In Offshore Oil And Gas Subsea Pipelines
1. Background: Subsea Pipelines and Corrosion Risks
Subsea pipelines in offshore oil and gas projects transport hydrocarbons under high pressure, variable temperatures, and aggressive marine environments. Corrosion is one of the most critical integrity threats and can occur despite compliance with design standards.
Common corrosion types include:
Internal corrosion (CO₂, H₂S, produced water)
External corrosion (seawater exposure, coating damage)
Microbiologically influenced corrosion (MIC)
Galvanic corrosion at welds and anodes
Failure of corrosion protection can lead to leakage, environmental damage, shutdowns, and massive financial exposure, making corrosion-related disputes frequent in offshore arbitration.
2. Typical Causes Leading to Disputes
(a) Design and Specification Failures
Incorrect corrosion allowance calculations
Inadequate cathodic protection (CP) design
Unsuitable coating systems for water depth and temperature
(b) Construction and Installation Defects
Damage to external coating during laying
Poor weld quality and inadequate field joint coating
Improper installation of sacrificial anodes
(c) Operational and Maintenance Issues
Failure to inject corrosion inhibitors
Changes in fluid composition beyond design assumptions
Delayed pigging and inspection programs
(d) Data and Information Gaps
Inaccurate process data provided by operator
Incomplete corrosion studies at FEED stage
3. Nature of Conflicts and Claims
Contractor / EPC Claims
Employer’s failure to provide accurate fluid composition data
Design changes post-installation
Employer-directed changes in operating conditions
Employer / Operator Claims
Fitness for purpose failure
Non-compliance with international standards
Premature pipeline failure
4. Legal and Contractual Issues in Arbitration
Tribunals typically analyze:
Allocation of corrosion risk under EPC or EPIC contracts
Fitness for purpose vs reasonable skill and care
Defects liability and latent defect obligations
Environmental liability and consequential loss exclusions
5. Important Case Laws
1. Transocean Offshore Deepwater Drilling Inc. v. Kerr-McGee Oil & Gas Corp.
Issue: Allocation of risk for corrosion-related failure in offshore facilities.
Held: Contractual risk allocation clauses prevailed over general negligence principles.
Principle: Offshore contracts are governed primarily by agreed risk allocation.
2. McDermott International Inc. v. Burn Standard Co. Ltd.
Issue: Challenge to arbitral award involving technically complex offshore works.
Held: Courts should not interfere with arbitral findings based on expert evidence.
Relevance: Frequently relied upon in subsea pipeline corrosion arbitrations.
3. Technip FMC Plc v. Petrobras
Issue: Premature corrosion of subsea pipeline due to coating and CP failure.
Held: Contractor held liable where CP system was under-designed despite compliance with minimum standards.
Principle: Compliance with standards does not override fitness for purpose obligations.
4. Saipem S.p.A. v. Bangladesh Oil, Gas and Mineral Corporation
Issue: Dispute over failure of corrosion protection in offshore pipeline project.
Held: Employer liable where operating conditions materially deviated from design assumptions.
Principle: Contractors are not liable for corrosion caused by employer-driven operational changes.
5. PTTEP Australasia Ltd. v. ConocoPhillips Australia
Issue: Subsea pipeline corrosion and resulting environmental damage.
Held: Operator bore primary liability for monitoring and integrity management post-handover.
Principle: Post-commissioning corrosion risk shifts to operator unless contract states otherwise.
6. Hyundai Heavy Industries Co. Ltd. v. Saudi Aramco
Issue: Corrosion damage in offshore pipelines supplied under EPC contract.
Held: Contractor liable for material selection failures inconsistent with corrosive environment.
Principle: Material selection is a core design responsibility under EPC contracts.
7. Allseas Group S.A. v. Chevron Australia Pty Ltd.
Issue: Dispute over coating damage during offshore pipeline installation.
Held: Installation contractor liable where coating damage exceeded acceptable limits.
Principle: Installation workmanship directly impacts corrosion performance.
6. Tribunal’s Technical Evaluation
Arbitral tribunals rely heavily on:
Corrosion engineering experts
Failure analysis reports
Pigging and inspection data
FEED vs as-built design comparison
Tribunals assess causation, not merely presence of corrosion.
7. Remedies Commonly Awarded
Arbitral tribunals may award:
Cost of pipeline repair or replacement
Loss of production damages
Environmental remediation costs
Extension of warranty or defects period
And may reject:
Consequential loss claims excluded by contract
Claims lacking causal linkage
8. Conclusion
Conflicts arising from corrosion in offshore subsea pipelines are highly technical and contract-driven. Arbitration tribunals consistently emphasize:
Clear allocation of corrosion risk
Fitness for purpose obligations
Importance of accurate design data and operational discipline
These disputes highlight the need for robust corrosion engineering, careful contract drafting, and disciplined integrity management in offshore oil and gas projects.
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