Velesto abandons the Naga 7 Jack-up

The Velesto Naga 7 jack-up drilling rig that sank last month as it prepared to start drilling for ConocoPhillips off Malaysia, remains sunken at the location.

Velesto confirmed on Monday, that it has sent a notice of abandonment to the insurers.

The Naga 7 sank on May 3, after one of the rig’s leg penetrated into the soil formation while jacking up at Salam-3 well off the coast of Sarawak for ConocoPhillips. The rig tilted and subsequently on May 4, 2021, sank at the site.

Two days after the rig's sinking, Velesto said it was unable to estimate the overall financial impact on the Group from this Incident, but expects it expected the damage to be mitigated "as the rig is adequately insured."

Velesto late in March announced it had secured a drilling contract for the rig with ConocoPhillips in Malaysia. The estimated value of the contract is around $8 million.

Under the contract, ConocoPhillips was to use the 2015-built, Gusto-designed, jack-up rig to drill up to three wells, with the start-up expected sometime in the first half of 2021.

The incident area is currently secured and being monitored as the Group works with the insurance underwriters and Protection & Indemnity (P&I) Club on the way forward.

The rig and other related liabilities are adequately covered under the Hull & Machinery insurance and the P&I Club, respectively. Progressing on the insurance claims, Velesto Drilling Sdn. Bhd, as the insured under the H&M policy, has on 31 May 2021 issued a notice of abandonment of the submerged rig, Naga 7 to the H&M insurers, pursuant to the H&M policy and currently await their response,” Velesto said.

The company did not say how much money it expected to recover from the insurance company.

VesselsValue valued the rig at $42.63 million a day before the incident.

As for the rest of its fleet, Velesto said Monday that three of its six available jack-up drilling rigs were working, with one more unit set to start mobilization by the middle of June.

The Naga 7 is a three-legged jack-up delivered by China's China Merchants Heavy Industries in 2015. The rig was built to a GustoMSC design.  It has a drilling depth capability of 30,000 feet (9144 meters) and has a rated operating water depth of 375 feet (114.3 meters).

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