Hyundai Heavy Industries Co., a major South Korean shipbuilder, said Tuesday that it has reached an agreement with a Norwegian customer to end their dispute regarding the canceled order of an offshore drilling rig.

Under the agreement, Hyundai Heavy will pay back US$176 million to Fred Olsen Energy ASA, in return for ownership of the Bollsta Dolphin semi-submersible drilling rig.

The dispute dates back to May 2012 when Hyundai Heavy won a $620 million deal from Fred Olsen, which called for the shipbuilder to deliver the vessel by March 2015.

But Fred Olsen had asked for changes in design and construction, and eventually terminated the deal in October last year citing a delay in delivery. The Norwegian firm demanded the return of $186 million in pre-paid installment and interest.

Hyundai Heavy launched arbitration proceedings demanding an additional payment.

But both sides agreed to terminate the dispute early this week.

Hyundai Heavy has already reflected some 220 billion won ($196 million) in losses stemming from the dispute on its balance sheet.

Hyundai Heavy plans to sell or lease the drilling rig, but it is uncertain if it will find a buyer or lessee amid a protracted industry slump.

Hyundai Heavy, meanwhile, has launched arbitration proceedings for two other canceled orders. (Yonhap)