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Petrofac hopeful of first gas by end of summer

The gas plant site back in late 2013. Petrofac says construction is now "substantially complete".

PETROFAC says it still hopes to deliver the first gas on its troubled Laggan-Tormore project before the autumn.

In a trading update issued on Tuesday, the company said construction work was “substantially complete” and it is now readying the pipeline and plant to handle its first gas sometime between July and September this year.

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Petrofac announced further losses of £30 million on the project as a result of “additional completion and pre-commissioning works”. It had already announced losses of £300 million on the project, and its share price rose by around 10 per cent with investors having factored in greater losses.

The £800 million Shetland Gas Plant has been plagued by lengthy delays which Petrofac blamed on a combination of weather and industrial action – prompting on-site trade unions GMB and Unite to say the company had “grossly underestimated” the complexity of the project.

Weather during the construction phase has been broadly typical of the Shetland climate, and the unions said it was “truly unbelievable” that Petrofac hadn’t factored that in at the outset.

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In April, Petrofac conceded its “shortcomings on the execution of this project”, with chief executive Ayman Asfari admitting the company had “a lack of experience” working in environments with such “high labour costs and low productivity levels”.

It meant the company had to employ many more workers than originally planned – last summer flooding the site with over 2,000 workers to get the job back on track. Various barges and ships were brought in to house construction workers, with the 850-bed accommodation block  only able to house a third of the peak workforce.

Production was originally scheduled to begin in the first half of 2014, with the company’s most recent estimate of July also being questioned by some involved in the project. 

Leaving aside its troubles in the North Sea, Petrofac told the markets on Tuesday that the future looked rosy with its backlog of projects now worth over $20 billion. Asfari said that gave it “excellent revenue visibility for the rest of this year and beyond”.

“Putting the challenges we have faced on Laggan-Tormore to one side, the rest of our portfolio continues to perform well,” he said.

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