Ocean KineticsOcean KineticsOcean KineticsOcean KineticsOcean Kinetics

Oil analyst says more dedicated operator for terminal at Sullom Voe could bring benefits

SIC leader Gary Robinson described the news as heralding "the end of an era". Image courtesy of BP.

INDUSTRY analysts and local politicians have responded with cautious optimism to Tuesday’s news that BP is set to hand over control of Sullom Voe Terminal (SVT) and its stake in the Magnus field to North Sea specialists EnQuest.

A Shetland Islands Council delegation will meet the prospective new operators on Thursday morning to learn more about their plans.

Following a teleconference with BP vice-president Tim Smith on Tuesday, SIC leader Gary Robinson described the change as “the end of an era for the oil and gas industry” but also the beginning of a new one and a “positive opportunity” for the islands’ future.

“The significance for Shetland cannot be underestimated,” he said. “EnQuest are known for managing end-of-life assets and extending their life. They will have the opportunity to focus on SVT and attracting new business, particularly from the west of Shetland.

“The council and the wider Shetland Partnership will be working with them to realise that opportunity. We are now looking to EnQuest to develop the arrangements at SVT to provide a competitive environment for opportunities to the west of Shetland.”

Nick Coleman of Platts says a smaller, "more dedicated" operator could have more incentive to keep the terminal going.

Council convener Malcolm Bell referred to a “positive relationship” with BP that had been “sustained over many decades” and said Thursday’s meeting would be the first step in developing a similar rapport with EnQuest.

With around 350 staff to be transferred from BP to EnQuest, trade union Unite said it would be working to safeguard employees’ rights during a process expected to take much of the remainder of 2017.

Nick Coleman, senior editor of oil news at industry specialist Platts, said that from EnQuest’s perspective the deal meant integrating ownership from its fields all the way to the terminal – its existing fields, such as Thistle and Deveron, already ship crude to Sullom Voe through the Ninian pipeline.

“That said, there’s more to Sullom Voe Terminal than EnQuest’s fields and the Ninian pipeline, so it will present new challenges for the company,” he told Shetland News.

“As for jobs, I’d say the oil price collapse has accelerated change in the North Sea, which means jobs and roles will change.

“For the Shetland Islands I’d have thought it’s not necessarily about the raw number of jobs – some of these workers will fly in and fly out and aren’t necessarily Shetland residents.

“Change means that new tasks and expertise are required, so there’s pressure on everyone in the industry to adapt.”

While Tuesday’s statement made reference to making the terminal’s operations more efficient, there was no explicit mention of job losses.

SIC development committee chairman Alastair Cooper pointed out that BP had already cut some jobs and there “were more still to go”.

SIC leader Gary Robinson hopes EnQuest will attract more business to the terminal.

He expects EnQuest to be “more aggressive in seeking further volumes” of throughput for the terminal, which means “there’s a likelihood of more staff being retained”.

“Even allowing for that you are going to see some staff being shed,” Cooper said. “I would, being selfish, rather see commuters than our own domiciled workforce being shed.”

He added that, with the exception of the occasional faux pas, BP had been “quite good at actually being part of the community, and I think that we need to see EnQuest have that same sort of commitment to the community”.

Coleman said EnQuest was a UK-focused company that had revived old oil fields in a “fairly efficient manner”, and that – while in the current climate with a global oil price just above $50 a barrel it would be wrong to rule out redundancies – it would be wrong to “assume that cutting costs means cutting jobs”.

He said the future of SVT, with its “very complicated ownership with 25 different companies”, had been under question within BP’s senior management for a number of years.

But he believes EnQuest could be a “more dedicated operator” that “will have the incentive to keep it going” in a way that BP, as a global player, might not have done.

The fall in oil price – from more than $100 a barrel back in 2014 – has “certainly focused minds”, Coleman continued.

It is not long since BP shelved plans for a £500 million new gas sweetening plant next to the existing terminal. There is also a view among some, including local politicians, that BP perhaps hasn’t pushed as hard to win more throughput for SVT in recent years.

 “BP’s intentions are spread out so widely that they have less of an incentive to make it work,” Coleman added. “it’s still a complicated asset to operate – it perhaps needs a more dedicated operator like EnQuest.” 

Categories