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SIC shocked at early oil field shutdown

SHETLAND Islands Council is set to lose hundreds of thousands of pounds of much needed income as a consequence of BP’s decision to cease production at its Schiehallion oil field sooner than expected.

The 850 million barrel oil field to the west of Shetland is being redeveloped as part of a £3 billion investment, and is only due back on stream by 2016.

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Currently oil from the field is brought to Shetland’s Sullom Voe oil terminal by shuttle tanker from where it is exported worldwide.

The council, which operates the oil port, earns 40 per cent of its harbour profits from Schiehallion.

The local authority had already budgeted for a massive drop in income between late 2013 and 2015.

But on Wednesday BP said that the partners in the oil field had pushed forward the date when production will cease to February 2013 to allow more time to install the substantial new subsea infrastructure.

“The main consequence of this decision will be minimal production in 2013,” a BP spokesman said.

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BP said they would increase production during the current year to offset some of the loss, but estimate the volume of shuttle tanker traffic to Sullom Voe would fall by 20 per cent from 40 to 32 tankers.

Sullom Voe harbour master Roger Moore said the decision would have “a significant impact” on council finances.

Captain Moore was not in Shetland on Wednesday and thus unable to give any figures of the size of the potential loss of income.

The chairman of the development committee, councillor Alastair Cooper said the council had known for over a year that Schiehallion was be taken out of production.

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“The decision to remove the vessel in February of that year, however, will have an impact on income for the financial year 2012/13, with a drop in vessel calls of around twenty percent. 

“That will affect the SIC’s ability to generate the £5 million pound surplus reported in our recent estimates exercise for that year.  This is obviously disappointing, but we are looking in the medium and long term to retain the production of Schiehallion passing through the Sullom Voe Terminal.”

The development will be discussed at Thursday’s meeting of the Harbour Board.

The reduction will have a knock-on effect on exports from the terminal, further hitting the harbour’s earning powers. 

The £3 billion investment will extend the life of Schiehallion until at least 2035 to allow BP and its partners to extract the remaining 400 million barrels of oil from the field.

Once production via a newly built Schiehallion FSPO re-commences in 2016, oil will initially be taken to Sullom Voe, however from 2018 the terminal will have to compete for that business as BP and others are looking at exporting directly into Europe.

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