Dong stops North Sea contract

30 March 2016

David B Cook, executive vice president of Dong Energy

Dong Energy is cancelling an EPC (engineering, procurement and construction) contract for the Hejre oil and gas project in the North Sea off Denmark, saying that a supplier consortium had been unable to meet its contractual commitments.

In its annual report for 2015 released in February 2016, Dong said that the Hejre project continued to be “a challenging situation” and that first oil in 2017 was no longer the likely scenario. Since then, the company said, it had worked closely with its partner Bayerngas Norge (Bayerngas) and the suppliers to determine the best way forward for the project.

It said that a key challenge for the project had been that the supplier consortium consisting of Technip France and Daewoo Shipbuilding & Marine Engineering had not been able to meet its contractual commitments under the EPC contract on the Hejre platform.

It has been reported that Technip disagrees with Dong's assessment of the situation.

Dong said, “This has, among other things, resulted in significant delays in the completion of the Hejre project.”

It added, “Dong Energy and Bayerngas no longer have confidence in the supplier consortium’s ability to deliver the platform and hold the consortium in material breach of its contractual obligations.”

As a result of this, Dong Energy and Bayerngas Norge have given notice to terminate the EPC contract with the supplier consortium with immediate effect. It said this meant that the platform would not be completed and that the Hejre project in its current form would be stopped.

Dong Energy and Bayerngas have agreed that Dong will be controlling the termination process towards the supplier consortium on behalf of the Hejre project. As such, it will assume potential financial up- and downsides related to the EPC contract and termination process towards the supplier consortium.

Dong and Bayerngas said they would jointly assess alternative ways for the development of the Hejre field, and would work closely with the Danish authorities in the process going forward.