DONG Energy has terminated a contract to build an oil and gas platform for its Hejre field, postponing indefinitely the major development offshore Denmark, the Danish majority state-owned utility said on Tuesday.
DONG said the supplier consortium, Technip France and Daewoo Shipbuilding & Marine Engineering, had not been able to meet its commitments under the contract.
DONG, which operates the field and holds a 60 percent stake, and Germany’s Bayerngas, which has the remaining 40 percent, will assess alternatives to develop the field and will work closely with the Danish authorities, DONG said.
The project, originally planned to start in late 2015, had been the largest development in recent years in the Danish section of the North Sea, and had been expected to help ensure the country’s oil and gas self-sufficiency.
“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,” DONG said in a statement.
“This means that the platform will not be completed and that the Hejre project in its current form will be stopped.”
Technip France did not immediately respond to requests for comment. Reuters was not able to get in contact with Daewoo Shipbuilding & Marine Engineering.
The field had been estimated to hold 171 million of barrels of oil equivalent and total investment in its development was around 12 billion Danish crowns ($1.8 billion), DONG said on its website.
Latest available data from the Danish Energy Agency showed the field was estimated to hold 15 percent of remaining oil and 24 percent of remaining gas reserves in the Danish sector of the North Sea as of Jan. 1, 2014.
With oil prices down around 65 percent since mid-2014, oil and gas firms have been forced to slash spending and postpone or cancel new projects.
DONG said in January it would keep its oil and gas unit as part of its anticipated initial public offering (IPO), after failing to find a buyer, but took a 16 billion Danish crowns writedown on the business.
The cancellation of the Hejre platform contract was not expected to result in additional impairment losses and did not change DONG’s outlook for the 2016 financial year, the company said. ($1 = 6.8382 Danish crowns)