Talisman Energy Inc. has struck a deal to scrap the platform at its troubled Yme oil project in the Norwegian North Sea.
The Calgary-based oil and gas giant said it has reached an agreement with Dutch maritime services group SBM Offshore NV – the platform contractor – to stop work on the production unit, including taking down the above-surface structure and ending all joint venture activity with SBM.
Talisman and its partners have experienced several delays and safety issues at Yme, including the evacuation of 140 workers from the field's mobile offshore production unit last July due to structural concerns. Norwegian authorities had called for a revision of development plans at the site.
Talisman said in a news release Tuesday that SBM will make an upfront payment of $470-million (U.S.) to put an end to all agreements and arbitration procedures over the project.
The mobile offshore production unit will be removed by Talisman and SBM will then scrap it, Talisman said.
Ownership of the on-site sub-sea structure will be transferred from SBM to the Yme license holders and alternative development concepts for the field will be assessed, Talisman said.
"This is a good settlement for Talisman, the Yme partners and Norway," Talisman executive vice-president for Europe-Atlantic, Paul Warwick, said in the news release.
"This arrangement should allow the partners to move forward to examine options for the Yme field, without incurring significant additional costs related to the existing topsides. Recent analysis has concluded that a new topsides solution is needed in order to develop the Yme field. Our first priority will be to remove the existing platform, safely and expeditiously."
Last May, Talisman booked a $250-million writedown on the project and put production on hold for an unspecified amount of time.
The platform had failed to meet Norwegian standards, the company said.
Oil production had been slated to start sometime this year.
Talisman has spent more than $1.35-billion in construction costs so far at Yme.
CIBC World Markets analyst Andrew Potter said in a research note Tuesday that the deal is positive for Talisman as it removes a "source of major uncertainty for [Talisman] shareholders" and frees up the company to move on to other options for its assets in Norway, including selling them.
The settlement amount of $470-million is also larger than he had expected, he said.