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Council / Low wholesale price sees SIC gas plant income take a dip

Shetland Gas Plant. Photo: Shetland News

THE INCOME Shetland Islands Council has received from the gas plant near Sullom Voe which is based on throughput has dropped by around £740,000 in just a couple of years.

The throughput income is based on the wholesale price of natural gas, and once it reaches a certain value, more income comes to landowner Shetland Islands Council. The higher the gas price, the greater the income.

It is in addition to the base rent for having the gas plant on the land.

But the low gas price saw the throughput income for 2020 sit at just £3,338.

In 2018 the total throughput income stood at a far more rosy £744,749.

Shetland Gas Plant, which is operated by international company Total, started being built in 2010 and six years later it was taking in gas from fields north west of the isles by pipeline.

The facility processes the gas and then ships it off again through a 230km pipeline which helps to take the export to the St Fergus Gas Terminal in Aberdeenshire.

The base rent income for the council started off at £100,000 per year during construction, with annual indexation included on top.

When gas started being exported, the deal struck between the council and the facility’s owners meant that the base rent then shot up.

In 2016 the council received £551,860 in rent, with more than £150,000 coming in via throughput.

Things steadily increased through to 2018, when the SIC received over £1.3 million in total.

While the base rent has gradually increased, the throughput income plummeted from £744,000 in 2018 to £63,331 the following year, before dropping again to £3,338 in 2020.

For the 2021/22 financial year council officials expect income of £671,000, which is base rent only.

The council’s infrastructure director John Smith said that once gas exports had started, the base rent increased to £550,000 per annum, plus annual indexation.

“The ‘throughput’ income is linked to movements in the wholesale price of natural gas over time,” he explained.

“There is a ‘threshold’ price in the contract. If the wholesale price of gas goes above that then the council gets additional income, the higher it goes the greater that is.

“The growth in 2017 and 2018 was a time where gas prices were higher than they had been in previous years, since then they have declined again.”

The trigger threshold price is a quarterly system average price of 40p per therm.

A spokesperson for Total said: “Total pays Shetland Islands Council in several ways, through rent for the gas plant’s site, business rates and the throughput tariff.

“The tariff is based on the price of gas and with low gas prices in 2020, payment to SIC was low. However, the large majority of what Total pays SIC has always been through business rates and rent.”