News / Gas plant ready to go in summer, Total insists
FRENCH energy giant Total is insisting its much-delayed Shetland Gas Plant will be completed by the end of the summer after contractor Petrofac said its plans to “ramp up” construction work had been held up.
In late summer 2014 the company was adamant the gas plant – being built by Petrofac – would be completed by the end of the year, but soon after revised its estimate to this summer.
On Monday, Petrofac issued a statement admitting it would make a further £130 million loss on the £3 billion Laggan-Tormore project, on top of the £160 million loss announced back in February.
It said the gas plant project – running more than 15 months behind schedule – was now “entering the final stages” with completion expected in the third quarter of 2015.
In response, a Total spokesman said: “Total continues to work with its main contractor Petrofac on the completion of the Laggan-Tormore project.
“We are confident that the new timelines will be kept to and that the project will be complete by summer 2015.”
Lerwick Port Authority said it had been advised that Petrofac was aiming for completion in July with extra personnel until the end of May.
LPA chief executive Sandra Laurenson said they had been advised that the Ocean Atlantic vessel would come into the harbor to accommodate extra workers from April until June “but the vessel does not appear to be ready. We are enquiring with Petrofac about this”.
She added there had not been a recent update on Petrofac’s requirements, but “it is our expectation that the three barges will remain until at least the end of the summer”.
She expects one barge will remain longer term to support the commissioning of the gas plant once construction is complete.
Petrofac’s statement to the markets – which resulted in its share price tumbling by 12 per cent on Monday morning – outlined that in late March and early April activity on the construction site as “ramped up substantially as we have moved into the final construction and commissioning phases of the project”.
“Continued adverse weather conditions during March on Shetland and industrial action has delayed this ramp up by almost a month from our original expectations,” the company stated.
“As the activity levels have increased, it has become apparent that we will need to expend significantly more man-hours to complete the project than anticipated as a result of low manpower productivity levels as the project nears completion, a greater level of rectification and reinstatement work than expected, coupled with the failure of one of our subcontractors to deliver in line with the agreed scope.”
The additional amount of workers and associated costs mean there will be a further pre-tax loss of around £130 million in 2015, Petrofac continued.
“The additional costs we expect to incur reflect our firm intention to devote all the necessary resources to the project to meet the delivery commitments we have made to our client.”
The company added that it anticipates construction activity being “substantially complete” by mid June and it will provide an update to the markets on 23 June.
Petrofac chief executive Ayman Asfari said the company was “deeply disappointed by this additional cost”.
He said the company had taken on direct responsibility for aspects of building the gas plant, admitting its “lack of experience of operating a direct construction model in a wholly new geography… particularly in a location where labour costs are much higher and productivity much lower than we are used to, has cost us dearly”.
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