SHETLAND has lost out to Aberdeen for the signing ceremony for the new Total gas development west of the isles.
UK energy minister Lord Hunt had been booked to fly to Shetland on Thursday to sign the Laggan-Tormore Field Development Plan in Lerwick.
However Shetland Islands Council took longer than expected to finalise a deal on the lease of land at Sullom Voe with the oil company Total, who are developing the £2.5 billion gas field in 600 metres of water 90 miles west of the islands.
The council sat down at 10am on Tuesday morning and only completed the meeting after two adjournments at 5.30pm on Thursday, with last minute negotiations between lawyers for both sides being carried out via mobile phone right up to the very last minute.
Observers had expected Lord Hunt’s visit to be re-arranged for next week, but such is the urgency behind getting this project off the ground, the signing ceremony was shifted to Aberdeen yesterday (Friday) where business secretary Lord Mandelson was paying a visit.
Total yesterday confirmed they had bought out Chevron’s 10 per cent stake in the field as well as the 20 per cent interest held by ENI UK Ltd, bringing Total’s share up to 80 per cent, with DONG E&P (UK) Ltd holding the remaining 20 per cent.
The Laggan-Tormore fields contain 230 million barrels of oil equivalent (boe), with peak gas production expected to reach 500 million standards cubic feet per day, along with condensates.
Construction work on the fields and the processing plant is expected to start “almost immediately” with first gas planned for mid 2014.
Shetland Islands Council convener Sandy Cluness expressed his delight at a deal being reached with Total.
“This is a significant decision for Shetland and I am delighted that the council was able to conclude this matter at their meeting on 18 March 2010. I am confident that the agreement represents the best possible outcome for Shetland,” he said.
“Securing the gas plant on land means that Shetland as a whole, and the north mainland in particular, will benefit from new jobs. Shetland is starting to see signs of the recession, and this new facility will bring welcome jobs in the construction sector, as well as in the operation of the plant and ancillary services.
“I also hope it can be the start of breathing new life into the future of Sullom Voe Terminal and secure Shetland’s position as a key player in the energy industry for years to come. The facility provides a new source of jobs and opportunities for our young people, to give them confidence to make Shetland their home.”
Regarding the negotiations themselves, Mr Cluness continued: “The negotiation process was intense and prolonged over a period of time. That is nothing less than we expected.
“I would wish to convey my thanks to the council’s negotiating team, who worked hard to secure the best possible outcome, taking account of all the risks and benefits associated with this project.
“I welcome the opportunity to work with TOTAL E&P UK Limited to develop this exciting project, which I hope represents the opening of a highway into the next stage of North Sea exploration and production.”
The terms of the agreement contain commercially sensitive information and therefore the council cannot make that public, at this stage.
Lord Mandelson said: "The announcement today that this £2.5 billion investment is going ahead is a major win for the Shetlands, for Scotland and for the UK.
"The new investment will involve a new gas processing terminal which will create up to 500 jobs in the Shetland during construction and the project overall will support about 2,100 UK jobs during its lifetime.
"It will be a major technical challenge developing the deepest gas fields to date on the UK continental shelf, Laggan and Tormore. I congratulate everyone involved for their hard work and for bringing on stream this very ambitious and worthwhile project.
"The recent initiative by the Treasury in extending Field Allowance to such fields has been particularly important. I wish Total every success."
Speaking about TOTAL’s decision to launch the development, and the government’s approval of the plan, Total managing director Roland Festor said: “Developing Laggan-Tormore in 600 metres of waterin the harshest environment on the UKCS will demand an investment of some £2.5 billion and the decision to proceed had to be carefully considered by Total and our joint venture partner, DONG E&P (UK).
“Despite its complexity and the risks associated with the environment, the decision to make this groundbreaking project happen underlines our ongoing commitment to pursuing our investments on the UKCS and helping to secure domestic energy supplies for the United Kingdom.”
Lord Hunt said: "This is a huge step forward for the wider development of the west of Shetland area which still contains about a fifth of the UK's oil and gas reserves.
"As we make the transition to a low carbon future, we must ensure we have secure energy supplies by making the best use of our indigenous energy through projects like Laggan and Tormore."
Secretary of State for Scotland Jim Murphy said: "This news is a major boost for one of Scotland and the UK's most vital industries. Our North Sea workforce is one of the most accomplished and respected in the world and the hostile environment they will face in the
deep waters west of Shetland should remind us of the dedicated contribution they make to our economy and energy security."