An offshore field owner alleged that an FPSO contractor failed to provide a fit-for-purpose vessel, citing recurring power outages and processing disruptions that affected its operations. Baker & O’Brien evaluated the FPSO’s condition, investigated the causes of the disruptions, and assessed operational and maintenance practices against applicable industry standards. We prepared expert reports and provided technical testimony during the arbitration hearing.

A floating production storage and offloading (FPSO) unit is a floating vessel used by the offshore oil and gas industry for the production and processing of hydrocarbons and for the storage of oil. FPSOs are attractive as they can process and store oil, which can later be offloaded into a tanker, avoiding the need for local pipeline infrastructure.

Under a long-term “charter and service” agreement (the “Agreement”), the owner of an offshore field (the “Lessee”) contracted with an FPSO provider (the “Contractor”) to charter, manage, operate, and maintain an FPSO vessel capable of processing and storing crude oil from a nearby platform. The Agreement included a fit-for-purpose obligation on the Contractor. In the later stages of the FPSO’s operational life, the vessel experienced several performance issues, including power outages and processing disruptions. The Lessee initiated arbitration proceedings alleging that the Contractor failed to provide a fit-for-purpose FPSO vessel.

Baker & O’Brien was engaged to provide independent expert analysis to assess the FPSO's general condition and the causes of the performance issues. The parties disputed whether the FPSO met its “fit-for-purpose” requirement. As a result, we proposed a measurable fitness-for-purpose definition based on the Agreement’s performance targets and assessed the performance accordingly.

Our work included four key aspects. First, we assessed the general condition of the FPSO vessel and its various systems, including the inlet and separation system, oil processing and stabilization system, gas processing system, and produced water treatment system. Second, we investigated the causes of the power outages and processing disruptions. Third, we evaluated the Contractor's operational and maintenance practices against industry standards commonly applied in offshore oil and gas operations. Fourth, we investigated whether the quantity and quality of the crude oil being processed by the FPSO may have caused processing disruptions.

Our team reviewed contemporaneous documentation, performance data, operating and maintenance records, and party correspondence. Based on this review, we prepared two expert reports and four joint expert reports. Our findings and opinions were submitted as expert evidence, and our three technical experts testified during the arbitration hearing.