ENERGY group SSE has hailed plans to pump £915 million into a raft of Shetland gas projects as a “natural step” for the company as it seeks to diversify its investment programme.
The Perth-based firm has struck a deal to pay French oil major Total £565 million for a 20 per cent stake in the new Laggan-Tormore gas plant on Shetland, along with interests in the Laggan, Tormore, Edradour and Glenlivet fields.
This allows us to capitalise fully on new offshore developmentArnaud Breuillac of Total
It also plans to invest about £350m over the next three years – including £170m this year – to complete the development of the plant and gas fields, known as the Greater Laggan Area.
SSE chief executive Alistair Phillips-Davies said: “The agreement to acquire these assets will help us to maintain the overall balance of the SSE group, support greater diversity in capital expenditure, and – crucially – contribute to meeting the gas requirements of customers and power stations for the next 15 years or more. That’s why we believe the acquisition represents a natural next step for SSE.”
The Greater Laggan project is expected to start production this financial year, with peak production of about five million therms of gas a day expected to be achieved during 2016.
When the deal completes, Total will continue as operator of the assets, with a 60 per cent stake. The remaining 20 per cent is owned by Dong Energy.
It had been reported earlier this year that Total had put its entire 80 per cent stake in the project up for sale with an estimate price tag of $1.5 billion (£960m) as part of a disposal plan linked to the slide in oil prices.
Arnaud Breuillac, the French group’s president of exploration and production, said: “The sale of these minority interests is aligned with Total’s portfolio management strategy and target of divesting $5bn of assets in 2015.
“It allows us to capitalise fully on this new deep offshore development, while retaining a majority interest and operatorship. With the start-up of Laggan, followed by Tormore, Edradour and Glenlivet in the coming years, Total is opening up a new frontier area for gas production in the United Kingdom.”
SSE estimated that the acquisition will see its total reserves grow to more than 100 million barrels of oil equivalent over the life of the fields in which it has interests. There is the possibility of additional reserves being extracted, it added.
The Laggan-Tormore plant, which lies to the east of the BP-operated Sullom Voe oil terminal, is being built by Petrofac and is due for completion in the third quarter of this year.
Petrofac racked up losses of $230m on the project last year and in April the firm said it expects to lose a further £130m this year amid delays blamed on bad weather, industrial action and problems with sub-contractors.
Once up and running, the plant will process and export gas for delivery to the St Fergus gas plant in Aberdeenshire, and Phillips-Davies said the scheme was “one of the most important infrastructure developments in the UK”.
He added: “We are focused on maintaining a balanced range of energy businesses, and we have regularly set out our wish to seek new opportunities to increase SSE’s presence in the upstream gas sector where assets can be acquired for a fair price, and that is exactly what this deal represents.
“The acquisition, including the Shetland gas plant, represents further investment in the UK energy infrastructure that gives access to gas from north-west Europe to help secure energy for customers and to help meet the needs of our gas-fired power stations, which will have an important part to play in supporting security of electricity supply.”