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Dong cancels Hejre EPC contract

April 1 - Dong Energy has terminated the engineering, procurement and construction (EPC) contract with Technip France and Daewoo Shipbuilding & Marine Engineering for the Hejre offshore platform, stating that the consortium has not been able to meet its c

In its 2015 annual report, Dong Energy said that its Hejre offshore oil and gas project continues to be in a challenging situation and that first oil in 2017 is no longer the likely scenario.

Dong Energy and its partner Bayerngas Norge (Bayerngas) noted that a key challenge of the project has been the Technip-Daewoo consortium and its inability to meet commitments, which it claims has resulted in significant delays in the completion of the project.

Dong Energy executive vice president, David B. Cook, said that Dong Energy and Bayerngas had decided to terminate the contract "due to the supplier consortium's material breach in meeting its contractual obligations under the EPC contract for the design and construction of the Hejre platform".

In light of the contract cancellation, the construction of the platform will not be completed and the Hejre project will be stopped in its current form, said Dong Energy.

Cook added: "We'll now take a step back to jointly evaluate the best way forward for the Hejre field."

Dong Energy will control the termination process on behalf of the Hejre project, meaning that it will assume potential financial upsides and downsides related to the EPC contract and termination process.

Dong Energy and Bayerngas explained that they will now jointly assess alternative ways for the development of the Hejre field, working closely with the Danish authorities going forwards.

Technip told HLPFI that it disagrees with Dong Energy's statement and will defend the interest of the consortium, while completing its contractual obligations.

"The engineering of this difficult project was achieved, while the construction phase was very well advanced," said Technip. "In this respect, this project represents today less than 1 percent of our backlog."

Technip added that the Hejre contract was part of the "difficult projects", for which the company announced one-off charges in July 2015.

The Hejre field is located in the central part of the North Sea near the Danish/Norwegian border. The now deferred development would have been the largest oil and gas project in the Danish sector of the North Sea for many years.

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