NHS Shetland - Survey - March 2021

Lerwick plans UK’s main decommissioning base

Dales Voe base due to be converted into the UK's largest decommissioning facility. Pic. L Farmer

SHETLAND’S energy industry jobs boom looks set to continue with plans for a deepwater quay north of Lerwick to break up major oil and gas installations.

This week Scottish first minister Alex Salmond announced a £10 million investment in a decommissioning “centre of excellence” at the Dales Voe base.

Lerwick Port Authority (LPA) has a deal with Norwegian civil engineering giant AF Gruppen (AFG) to convert Dales Voe into the UK’s largest decommissioning base.

The £50 million project, which could open as early as 2015, would provide a 24 metre deep berthing facility to handle the largest heavy lift crane vessels bringing offshore installations ashore for scrap.

The port hopes to persuade the UK government to match fund the Scottish investment, which has been split between the Holyrood government and Highlands and Islands Enterprise with each providing £5 million.

LPA chief executive Sandra Laurenson said Shetland could expect AFG to employ around 100 people at the base when it is operating at full capacity, with perhaps 50 more engineering desk jobs being created at the company’s Aberdeen office.

It is estimated that the UK offshore decommissioning business is worth around £30 billion and could create work for the next 30 to 40 years.

AFG are currently Scandinavia’s largest decommissioning business handling rigs at their deepwater facility with ambitions to win work around the world. Lerwick is attractive to them as a natural deep harbour very close to the bulk of rigs in the northern North Sea, as advertised on their website

In Lerwick they will be competing against Peterson SBS and Veolia who already jointly handle decommissioning work at the port’s Greenhead base. The only other yards currently handling large offshore structures in the UK are at Teeside and Tyneside.

First minister Alex Salmond meets AF Gruppen chief executive Pal Egil Rønn at the company's Oslo headquarters this week.

Mr Salmond said he was “determined” the government would do all it could to support the oil and gas industry providing jobs and economic activity in Scotland.

AFG chief executive Pal Egil Rønn said they were pleased with the support they had received for their “long-range and major investment plans” to develop a “unique site” in Shetland.

Two years ago LPA and AFG signed an exclusivity agreement to develop Dales Voe. Since then they have completed designs and are now working on an environmental impact assessment and securing finance.

Once built, the base would also be able to handle secondary projects such as rig maintenance, ship dismantling, reception and even construction of offshore installations.

Ms Laurenson said they had approached the UK government for a further £10 million and hoped to engage with them “in the next month or so”, while at the same time approaching banks for commercial loans.

Northern isles MP Alistair Carmichael announced this week that he had secured a meeting with UK energy secretary Ed Davey to discuss the matter.

“The water depth and capability for these large craft to come alongside does not exist anywhere else in the UK at the moment,” Ms Laurenson said.

“At the port we see this as a piece of infrastructure that will be there for the port for many years to come.

“Fred Olsen built the Greenhead base in the ‘70s and that’s a development that’s been reused and redeveloped ever since, and I imagine this will be the same.”

The Dales Voe base originally opened in the mid 1980s as a site to inspect, repair and maintain offshore oil and gas installations, but the business never got off the ground because of the 1986 oil price crash.

Despite being labeled “a white elephant”, the port has used the facilities ever since for storage and as a useful quay for vessels outside of the main harbour.

Over the next few years hundreds of jobs are being created in Shetland building the Total gas plant at Sullom Voe, with more jobs in the pipeline if the Viking Energy wind farm proceeds.