Bosses eye up £150m deal to turn oil yard into base for wind turbines

Published on Thursday 17 December 2009 21:46

A FORMER Highland oil yard is set to become a major manufacturing base to support the offshore wind turbine industry in a project worth £150 million and 2000 jobs.

KBR, the American engineering and construction company, is considering converting the former fabrication facility at Nigg in Easter Ross.

However, a decision on the "high risk" project is not expected until at least May next year while the firm weighs up the market.

The yard, which opened in the mid-1970s, built some of the world's largest oilrigs and once employed 5,500 workers. It went on to a "care and maintenance" basis in 2000 and now just 150 people work there.

KBR owns two thirds of the yard and has a 30-year lease with a family trust which owns 76 acres, including the dock.

Peter Morgan, the firm's operations director, told The Scotsman: "What is being considered is building the foundations to support the offshore wind turbine industry.

"We have been engaged in looking at the sustainability of that market and potential growth and whether there is a business case to be made for KBR to deviate from selling the yard into creating a new renewables business.

"We have been seriously engaged in these studies since June, looking at product types, the type of facility we would need at Nigg, capital investment requirement and recruitment and training plans.

"The underlying problem is that offshore windfarms are an economic form of power generation only as long as the government continues its intervention on price mechanism."

He said the market being sustainable only with government support created uncertainty for investors, while it is unclear what the industry's potential will be.

He said the scale of the project needed would require massive capital investment: "What we are struggling with right now is the dynamics of that investment decision-making process, how we couple market uncertainty with capital investment."

Mr Morgan said the KBR board will be updated on the situation this month, but will not make a decision on investment before May.

He said: "That's because we would not be sufficiently advanced in our engineering to know precisely what we want to commit to."

If the plan does go ahead it would be a phased project with around 2,000 jobs created by 2019.

Earlier this year Jim Mather, the enterprise minister, chaired a meeting in Inverness to discuss the future of the yard.

Highland Council, which sees the facility as playing a vital role in creating jobs for the region, has considered making a case for compulsory purchase of the yard to bring it back into use.

Two giant turbines for the Beatrice Wind Farm, the 41m flagship project for offshore wind energy development in Scotland, the UK and Europe, were recently completed at the facility.