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Energy / Council seeks to renegotiate Sullom Voe lease

SHETLAND Islands Council is at the early stages of renegotiating lease payment for the land Sullom Voe Terminal is built on.

With the current lease arrangement due to run until 2025, the council is keen to hammer out a deal with terminal operator EnQuest that will better reflect the potential new energy business planned for the facility.

Last month, EnQuest’s finance director Salman Malik spelled out plans to completely rebuild the site over coming years to incorporate carbon capture and storage as well as hydrogen production while oil and gas throughput continues to fall.

Sullom Voe Terminal key in EnQuest’s bid to become a green energy leader

If these plans come to fruition, up to 200 new jobs could be created there while extending the lifespan of the terminal for many more decades.

The SIC leases the land at Sullom Voe from Shetland Charitable Trust and sub-leases it to EnQuest.

In 2021/22 the lease was worth around £500,000, made up of a fixed rent element plus a payment based on throughput. The money is passed on to the charitable trust.

Council chief executive Maggie Sandison said the time was right to review the arrangement with the oil and gas industry and added that the lease needed to transition with activities carried out at the terminal.

“With the lease up for renewal in 2025 the intension is to modernise the lease to make sure that other developments on site also see a return around community benefit,” she said.

“We have been engaging with EnQuest around their future plans (…) to make sure the lease recognises the value of the asset as it is being used to make the transition to new energy.

“The lease arrangements have been in place for a very long time and that’s why it feels like a good opportunity to recognise the need to modernise because many of the things that will be happening in the future could not have been envisaged 30 odd years ago.”

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She added that now feels about the right time to have a conversation about the potential future value of the facility and how that should be reflected in the lease for the site.

A spokesperson for Enquest said: “We are committed to securing a long term future for the terminal and are engaged with Shetland Island Council to deliver an extension to the lease.

“The primary focus for the lease extension is ensuring continued oil and gas production at the terminal.”

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