It said the decision was due to serious delays in construction and continued price increases.
"We are very disappointed," Odfjell President Terje Storeng said. "What has become apparent is the yard's lack of respect for the contract and the willingness to not fulfill its obligations."
Odfjell intends to claim full compensation for its costs and losses over "massive" contract breaches by the yard.
The $500 mln contract was signed in 2004 and was billed as a historic deal in Norwegian-Russian economic relations. The contract price subsequently increased to $544 mln.
The deal was for 12 45,000dwt IMO type II coated product/chemical tankers. The first vessel was expected to be delivered in September last year.
Sevmash, Russia's largest shipyard, in Severodvinsk, northern Russia, builds nuclear-powered submarines, oil and gas platforms and tankers.
