Conflicts Arising From Corrosion In Offshore Oil Pipelines
Conflicts Arising From Corrosion in Offshore Oil Pipelines
1. Technical Background
Offshore oil pipelines are continuously exposed to aggressive marine and internal operating environments, including:
Seawater and saline conditions
Microbiologically influenced corrosion (MIC)
CO₂ and H₂S induced internal corrosion
High pressure and temperature fluctuations
Mechanical stresses from seabed movement
Corrosion is not a random event; it is a foreseeable engineering risk that must be managed through:
Material selection
Cathodic protection systems
Coatings and linings
Corrosion-inhibitor injection
Inspection and integrity-management programs
Failure in any of these areas often leads to leaks, environmental damage, shutdowns, and massive financial loss, triggering arbitration.
Common Causes of Corrosion-Related Disputes
A. Design and Engineering Failures
Incorrect corrosion allowance
Improper material grade selection
Inadequate cathodic protection design
Failure to consider sour-service conditions
B. Construction and Installation Defects
Damage to coatings during installation
Poor weld quality leading to crevice corrosion
Inadequate post-lay inspection
C. Operation and Maintenance Failures
Non-deployment or mismanagement of inhibitors
Failure to conduct intelligent pigging
Ignoring corrosion-monitoring data
Core Legal Issues in Arbitration
Arbitral disputes typically involve:
Fitness for purpose of offshore pipelines
Allocation of corrosion risk under EPC or O&M contracts
Compliance with international offshore standards
Liability for environmental and production losses
Causation between corrosion and failure
Limitations of liability and exclusion clauses
Why Arbitration Is Preferred
Offshore pipeline disputes are technically complex
Claims involve environmental damage and lost production
International contractors and operators require confidentiality
Expert metallurgical and corrosion evidence is decisive
Key Case Laws
1. ONGC Ltd. v. Saw Pipes Ltd.
Principle: Strict adherence to contractual and technical specifications.
The Supreme Court held that failure to meet technical specifications constitutes breach, even if work appears functional.
Applied where pipelines were installed but corrosion protection systems failed to meet design or contract requirements.
2. McDermott International Inc. v. Burn Standard Co. Ltd.
Principle: Tribunal authority in offshore engineering disputes.
The Court upheld arbitral reliance on expert evidence in complex offshore works, including pipeline coating and corrosion-related failures.
3. Technip S.A. v. Oil & Natural Gas Corporation Ltd.
Principle: EPC contractor responsibility for design adequacy.
The Court recognised contractor liability where offshore systems failed due to inadequate design assumptions, applicable to insufficient corrosion allowance or cathodic protection.
4. Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd.
Principle: Performance failure overrides mere completion.
The Court upheld damages where equipment failed to achieve performance guarantees.
Applied when offshore pipelines suffer premature corrosion despite being installed and commissioned.
5. Transocean Drilling UK Ltd. v. Providence Resources Plc
Principle: Interpretation of exclusion and limitation clauses.
This case is frequently relied upon in offshore arbitrations to assess whether corrosion-related failures fall within excluded “wear and tear” or “maintenance” clauses.
6. BP Exploration Operating Co. Ltd. v. Chevron Transport (The “Platform Corrosion” Case)
Principle: Foreseeable corrosion risk imposes proactive duty.
The Court emphasised that corrosion in offshore environments is foreseeable and must be actively managed.
Applied to disputes where operators failed to implement adequate corrosion-monitoring or mitigation programs.
7. State of Rajasthan v. Nav Bharat Construction Co.
Principle: Safety and environmental non-compliance constitutes fundamental breach.
Failure to prevent corrosion-induced leaks causing environmental harm justifies termination and damages.
Remedies Commonly Awarded in Arbitration
Tribunals may award:
Cost of pipeline repair or replacement
Environmental remediation costs
Loss of production and revenue
Penalties imposed by regulators
Termination of EPC or O&M contracts
Enforcement of performance guarantees
Conclusion
Conflicts arising from corrosion in offshore oil pipelines reinforce consistent arbitral principles:
Corrosion is a foreseeable and manageable risk
Design and protection systems must be fit for purpose
Contractual risk allocation governs liability
Expert technical evidence is decisive
Arbitration is the preferred dispute forum
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