OIL company BP has put “on hold” plans to build a £500 million gas sweetening plant at Shetland’s Sullom Voe oil terminal.
The move comes as the oil industry adjusts its operations in response to the sharp decline in the price of crude oil over the past 18 months.
One year ago BP said they were delaying the project by six months, but no timeline has been given for the delay this time.
Instead the oil firm says they will look at sweetening gas piped in from west of Shetland by Total using existing facilities offshore.
The decision means the loss of up to 500 construction jobs at the terminal.
The gas sweetening plant, which was granted planning permission almost two years ago, was expected to employ around 30 people full time once it started operating.
It was designed to remove hydrogen sulphide from “sour” gas transported by BP from its Clair field, before being piped to the North Sea’s Magnus field and the domestic gas market.
Local contractors DITT are completing the preparation work for the 16 hectare site at the end of next month.
The 20 employees they have working on the project face redundancy.
BP has said that now the initial site preparation works have been completed for the sweetening plant, they expect the focus to shift “to invest in, and maximise use of, existing equipment and potentially undertake additional sweetening offshore”.
Local councillor Alastair Cooper said he was not surprised by the decision, which comes weeks after BP told a quarter of its 350 staff at Sullom Voe oil terminal they would be laid off by the end of June.
“We have been hearing rumours about this for weeks,” he said, adding that this was bad news for the local economy.
Fellow councillor Andrea Manson said that she hoped the decision would mean BP stepped up its work refurbishing the terminal, which has another 25 years of life.
The new Clair Ridge field west of Shetland is due to come on stream next year, which will double the amount of oil being handled by the terminal.
Concerns have been raised about the future of the East Shetland Basin which supplies about 120,000 barrels of oil every day to the Shetland oil terminal.