SIC/Total deal made public

FRENCH oil and gas company Total is to pay £550,000 in rent each year to Shetland Islands Council on top of a throughput levy for all the gas flowing through its new plant being built at Sullom Voe.

Until production starts at the £500 million plant in 2014, Total are only paying £100,000 ground rent for the 112 acre site next to the existing oil terminal operated by BP.

The 150 page lease agreement was made public on Wednesday after being settled in March last year after intense negotiations.

Total have never signed such an agreement before, but were desperate to get on with building the plant which will unlock the huge gas fields at Laggan/Tormore and elsewhere west of Shetland.

Work has already commenced laying the pipelines and preparing the foundations for the site, which includes the removal of 650,000 cubic metres of peat that will have to be reinstated once production stops as part of the deal.

The council has estimated the development will pump £200 million into the local economy over the next 30 years. Around 800 construction jobs will be created in the isles.

Every quarter the authority will receive a rent cheque and after 2014 it will also receive a share of the cash generated from the gas production itself.

The council has been given the power to check how much gas is being produced and will have oversight of environmental and health and safety matters. Laggan/Tormore is expected to produce 100,000 barrels of oil equivalent per day at its peak.

Work on laying the 90 mile pipeline westwards for the £2.5 billion development began last month, with a further pipeline to be laid eastwards that will take the gas to the UK mainland.