OSLO--Canadian energy company Talisman Energy Inc. (TLM, TLM.T)
said Tuesday that an unsafe oil platform offshore Norway will be
scrapped, without a drop of crude ever being produced, following a
$470 million settlement with owner of the facility, SBM Offshore NV
(SBMO.AE) of the Netherlands.
The Yme platform was supposed to begin producing oil in January
2009 but was evacuated last summer after cracks were found in its
structure. Talisman said the settlement with SBM paves the way for
the removal of the rig and its eventual replacement with another
facility to tap the oil reserves in the Yme field.
A representative of Norway's offshore workers union warned that
the settlement could ultimately deprive Norway of billions of
kroner in lost tax revenues. The union also called for more checks
to verify the safety of the increasing number of oil and gas
platforms destined for use in Norway that are being built outside
the country.
The Yme platform was built in Abu Dhabi by an SBM
contractor.
The initial Yme project cost was estimated at 4.9 billion kroner
($856 million), but numerous safety problems discovered in the
platform upon arrival in Norway led to serious cost overruns and
delays. So far, the license partners have invested more than 10
billion kroner in Yme, Talisman said.
About half of that was spent on wells and subsea installations
that could still be used if the platform were to be replaced, the
rest went on the platform, the company said.
"The $470 million [payment from SBM Offshore] will cover
additional work necessary to ensure the safe re-manning and
removal," of the platform from the North Sea, said Talisman Norway
spokeswoman Grethe Elise Foldnes.
The Yme platform will eventually be dismantled, SBM Offshore
said. SBM board member Sietze Hepkema said in a statement that the
agreement would bring, "an end to a period of significant
uncertainty for the company."
The problems with the Yme installation aren't just a concern for
the companies involved, but also for the Norwegian government.
Under Norwegian law, oil companies can deduct 78% of their costs
from their taxes, meaning Talisman will be able to offset costs
related to Yme from future tax payments on other earnings in
Norway.
The full cost to in lost tax revenue isn't known. "The final
bill for Yme isn't settled yet," said Ms. Foldnes.
"Seventy-eight% [of the cost overrun] will be charged on the
community. These are outrageous costs for the society," said Roy
Erling Furre of the Norwegian offshore union SAFE. "The whole story
is absolutely shocking and absurd."
The SAFE union said it wants the government to investigate the
matter, as did Norway's Christian Democratic party and the
conservative Hoyre party, who are in opposition to the
government.
The Norwegian government didn't respond to requests for
comment.
Mr. Furre also said the problems with Yme should prompt further
checks on the quality of work conducted at shipyards outside
Norway.
"We may need a thorough investigation in order to learn, to find
out what went wrong and maybe avoid new developments going wrong,"
Mr. Furre said. "We have a lot of huge development projects ahead
of us."
A number of platform contracts have recently been awarded to
foreign shipyards due to heavy cost inflation in Norway. For
example, state-controlled Norwegian oil company Statoil ASA's (STO,
STL.OS) $1.07 billion Dagny platform contract was awarded to Daewoo
Shipbuilding & Marine Engineering Co. Ltd (042660.SE) in South
Korea in February.
Statoil said it would follow up its Asian projects in the
engineering phase and with on-site teams just as closely as it
would have done if the project was built on a Norwegian yard.
Statoil said it didn't worry about delays, cost overruns or quality
issues at Asian shipyards.
"If we were worried about that, we wouldn't do it," said Statoil
spokesman Ole Anders Skauby. Bids from Asian shipyards had been
thoroughly considered both on commercial and technical terms.
"Price is not the only determining factor," he said.
The Yme field is operated by Talisman with a 60% stake. Polish
state-controlled refiner Grupa Lotos SA has a 20% ownership stake,
Germany's Wintershall AG has a 10% stake and Norske AEDC AS has a
10% stake.
Write to Kjetil Malvenes Hovland at
kjetilmalkenes.hovland@dowjones.com
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