Aker Solutions and Statoil cancel Cat B contract

CatB-rigJUNE 24, 2013 — Aker Solutions ASA and Statoil ASA have canceled a contract for delivery of a semisubmersible rig capable of year-round well-intervention services on the Norwegian continental shelf.

The companies in April 2012 agreed Aker Solutions would build the so-called Category B (Cat B) rig and use it to provide Statoil with a range of well- intervention and drilling services for an initial eight years, starting in 2015 (see earlier story).

At that time the Cat B was described as "an entirely new type of semisubmersible rig" and Statoil hailed it "as an important technological advance for the industry that will make a major contribution towards increasing recovery from existing fields."

Statoil described the rig as "designed and equipped for the industrialization of drilling and intervention services in existing production wells" and providing a new sort of service.

Today, though, Aker Solutions said: "The technology development needed to build the rig has since proven to be considerably more demanding than initially anticipated and the parties on 24 June mutually agreed to terminate the contract with immediate effect."

"Aker Solutions and Statoil have together concluded that the project can't be realized within the framework of the contract," said Per Harald Kongelf, regional president for Norway at Aker Solutions. "Unfortunately, the technological issues weren't solved in the initial system definition phase of the project. We still believe in the concept of Cat B, but the technology needs more time to be developed."

Well-intervention services are used to boost recovery rates from oil and gas production wells and have traditionally taken place on fixed platforms. Ships and rigs have in more recent years been developed to perform the same type of service on subsea wells where recovery rates have been much lower. Developing the subsea technology needed for Cat B to provide the required services in shallow waters proved to be particularly challenging.

"We made significant progress in developing Cat B," Mr. Kongelf said. "We will seek to use the experience we've gained to explore future possibilities for maturing and realising this type of technology."

Each party will be accountable for its own project-related costs. Aker Solutions will in the second quarter book a one-off cost of NOK 375 million, of which NOK 355 million will be recognised as an impairment of the investments in the Cat B project, while the remaining are operating costs. The charter period's contract value of NOK 11.2 billion will be removed from Aker Solutions' order backlog, which totalled NOK 71.7 billion at the end of March 2013.

The Cat B project was within the company's oilfield services business unit, which Aker Solutions has previously said it intends to spin off. It says that "the clarification surrounding the Cat B contract is expected to aid this process."

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