Dong Energy settles Hejre platform dispute

Danish energy firm DONG Energy has settled a dispute with Technip and Daewoo over a cancelled offshore platform order.

To remind, in March 2016, DONG Energy and Bayerngas terminated the contract for the engineering, procurement and construction (EPC) of the Hejre platform with the Technip-Daewoo consortium. Technip (now TechnipFMC) and Daewoo have disputed the cancellation.

In a statement on Thursday, DONG Energy said it had entered into a settlement agreement regarding the dispute, including the arbitral claims, related to the EPC contract.

According to the agreement, the supplier consortium holds full responsibility for the disposal of the Hejre platform, which will be dismantled by DSME. DONG Energy will have no further responsibilities or liabilities with regard to the platform.

The settlement agreed will have a positive impact for DONG Energy on cashflow and will reduce provisions made in relation to the Hejre project with a positive EBIT effect of DKK 0.9 billion within discontinued operations.

David Cook, Executive Vice President in DONG Energy, said: “This is a good outcome for our business. I’m very satisfied that we’ve reached a solution on the disputes and arbitral claims with the supplier consortium. We can now put this issue behind us and continue our focus on running a safe, successful and sustainable oil and gas business.”

As per agreement with the Hejre licence partner, Bayerngas, DONG Energy has been controlling the termination process with the supplier consortium on behalf of the Hejre licence partners and assumed all potential liabilities, rights and benefits arising out of the contract and the termination process.

The settlement does not affect the ongoing assessment with Bayerngas on re-development alternatives for the Hejre field.

Despite looking at ways to develop the Hejre field, DONG Energy has reiterated its previously announced outlook for the 2017 financial year in which its Oil & Gas business is presented as an asset held for sale and discontinued operations.

Background

Hejre Field is located in the central part of the North Sea near the Danish/Norwegian border. The development plan of the Hejre field comprised installation of a new production platform, including accommodation, wellhead and processing modules, five new production wells and separate pipelines for the oil and gas.

The project was originally scheduled for production in 2015, then put off to 2017, but Dong Energy and Bayern gas then cancelled the platform order with Technip-Daewoo consortium last year, citing significant delays due to issues with Technip and Daewoo.

The duo was awarded the contract that covered engineering, procurement, fabrication, hook-up, and commissioning assistance for a fixed wellhead and process platform and associated facilities on the Hejre field in February 2012.

In response to delays, Dong Energy and Bayerngas stopped the project, saying in March 2016 they no longer had confidence in the supplier consortium’s ability to deliver the platform and “hold the consortium in material breach of its contractual obligations.”

Responding to Dong’s claims last year, Technip in April 2016 said it disagreed with “many aspects of the Dong statement and will defend its interests as arbitration proceedings on claims proceed.”

Offshore Energy Today has reached out to Dong Energy seeking more details on the settlement.

Offshore Energy Today Staff