Council / How soon will we have to subsidise Sullom Voe?
THERE was an elephant in last week’s SIC harbour board meeting, writes former councillor Jonathan Wills in this analysis of what happens when there are no longer enough tankers to pay for our council’s costs in running the port of Sullom Voe.
Board members heard that the surplus on the council’s activities as harbour authority for Sullom Voe and other, smaller Shetland harbours in the current financial year will probably be £4.8 million. That’s £3.4 million less than the £8.2 million projected earlier this year, a drop of 41 per cent.
Tanker traffic has declined markedly, due to the oil companies pumping less oil through the terminal. At its peak throughput in 1984, over 650 tankers carried away 58.3 million tonnes. By financial year 2023/24 the tonnage of oil shipped had declined to less than a tenth of that and was just 1.2 per cent of UK oil tanker traffic; only 57 tankers sailed, with a total of 5.1 million tonnes; the following year there were 51 tankers and 4.6 million tonnes.
In the first two quarters of this financial year 20 tankers arrived and loaded 1.8 million tonnes. If the second half of the financial year is no better, Sullom Voe could see only 40 tankers for the year and pump only 3.6 million tonnes. That would be a reduction of almost 30 per cent in trade since April 2023.
The numbers involved are very large: it costs the average 60,000-tonne tanker £440,000 for a single visit to Sullom Voe. That’s about 1.4 per cent of the average cargo value of £31 million. Last year the value of all the oil shipped from Sullom Voe was about £1.5 billion, at mid-November 2025 prices for Brent Blend. The oil companies are not making a loss, not yet, but shipping oil from Sullom Voe is more expensive than from, for example, Mongstad in Norway.
If the 19 oil company partners in Sullom Voe want to continue pumping through pipelines from the oilfields in the East and West Shetland basins they’ll have to find a way to keep the Shetland terminal open, or else spend a lot of money installing offshore loading equipment to get oil out of reservoirs that are declining. If the council can no longer afford to keep the port open, someone else will have to find the cash or it will close.
At present most of the profit from running the port goes, quite properly, into the council’s general fund, as it has done for many years. The original plan this year was to transfer £6 million from the harbour reserve fund to the general fund but the downturn at Sullom Voe means this will now be 44 per cent less. As the report to board members put it, this will “add pressure to other funding sources to balance the general fund”.
Photo: John Bateson for Shetland News
The position may be worse than it looks because the council’s rent from the gas plant (formerly owned by Total) appears to be lumped in with takings from pilotage, towage, mooring fees, jetty charges and the rest of the purely maritime services the council provides.
Due to increased gas prices, the gas plant income this financial year will be £1.3 million, slightly more than originally forecast. So the real surplus from all SIC port operations (including Scalloway, Cullivoe and smaller harbours) in 2025/26 is likely to be only £3.5 million rather than £4.8 million.
You may wonder why the council’s revenue from the gas plant is included in the harbour accounts. Good question, for the gas would appear to have nothing to do with the port. It passes through Sullom Voe in pipelines. Gas tankers no longer call there and the gas loading equipment on Jetty Two was decommissioned many years ago.
Whatever the historical/fiscal explanation for that mystery, the port of Sullom Voe is now approaching the point where the council’s general fund may have to start subsidising the harbour reserve fund. If the annual number of tankers dips below 35 it could happen just a year or two from now.
Section 67 (3) of the 1974 Zetland County Council Act, which gave our council the power as port authority to set up a harbour reserve fund, foresaw this possibility. It says:
“Any reserve fund provided under this section may be applied –
- in making good to the county fund any deficiency at any time arising in the income of the Council from the harbour undertaking;”So that call on the reserves has priority. The Act lists four other ways in which the council can spend the harbour reserve fund:
- “meeting any extraordinary claim or demand”;
- capital works in the harbour;
- repairs and maintenance;
- “any other purpose which in the opinion of the Council is solely in the interests of the county or its inhabitants” (for example, balancing the SIC’s books).
What the inhabitants of the county of Shetland would think about subsidising the oil companies to use our harbour is not hard to imagine. The original idea was that the owners of the Sullom Voe Terminal would take it to pieces, take it away and reinstate the land when they’d finished with it. I seem to remember a planning condition to that effect. To prepare for this long-term ‘contingent liability’ they presumably set money aside each year into a fund, which in the Alaskan oilfields they call ‘held in escrow’. Whether that fund ever existed and, if it did, what happened to the bank interest it generated, are interesting questions for another day.
In the meantime the search continues, urgently, to find alternative industries, with the proposed ‘energy hub’ at Neshion, on the Yell Sound shore east of the gas plant, perhaps supporting the production of alternative ‘green’ liquid cargoes that might be loaded onto ships at the port of Sullom Voe after that last oil tanker has sailed. If this search does not produce results before the council’s harbour goes into the red, something else is likely to happen and it would not be pleasant. Not only would hundreds of jobs be lost. Council services would have to be cut, unless the grant from the Scottish Government went up.
If the port of Sullom Voe closed, we’d still have about £400 million of reserves which the council has built up in the 47 years since the first tanker loaded a cargo there, but they’d no longer be topped up by annual surpluses in the harbour account. So the ‘unsustainable’ habit of generations of councillors, which generations of their finance officers have condemned – balancing the books each year with more cash than the reserves can earn on the stock market – would have to end, or our nest egg will dwindle. This year, for example, councillors will take about £48 million out of reserves when they can only afford, ‘sustainably’, to take £15 million.
Down at the Lerwick White House, the masters and mistresses of our fate are already ‘addressing’ Sullom Voe’s jumbo problem, I hear. Good luck to them. They’ll need it.
As for the obvious and immediate economies that could be made, I hesitate to mention either the recent disparity in percentage pay rises for different grades of council staff, or the bills for consultants who tell us what we already knew, or the fees and expenses of investment management companies (some of them with dodgy associations) to whom our council’s oil money has been a cash dispenser for almost half a century.
