Total offloads N. Sea gas fields and Shetland gas plant to SSE in £565m deal

Alistair Phillips-Davies, Chief Executive, Scottish and Southern Energy)
Alistair Phillips-Davies, Chief Executive, Scottish and Southern Energy

By DARA BUTTERFIELD

Scottish power company SSE has acquired a 20% interest in four gas fields in the North Sea –  as well as a 20% interest in the new Shetland gas plant –  for £565 million

Through its wholly-owned subsidiary SSE E&P UK Limited, the Perth-based utility has entered into an agreement with Total E&P UK to acquire: a 20% interest in the four gas fields and surrounding exploration acreage approximately 125km north west of the Shetland Islands, collectively known as the Greater Laggan Area; as well as the new Shetland Gas Plant interest.

Total will continue as operator of, and will own a 60% stake in, these assets. The remaining 20% is owned by the mostly-renewables Danish provider DONG Energy.

Alistair Phillips-Davies, SSE Chief Executive,  said: “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 our activities in the upstream gas sector where assets can be acquired for a fair price, and that is exactly what this deal represents.

“The acquisition means we will be able to introduce further diversity across our investment programme. It comes following a period of relatively low wholesale gas prices and is therefore timely. It completes our portfolio of gas production assets for the foreseeable future.

“The acquisition, including the Shetland Gas Plant, represents further investment in the UK energy infrastructure that gives access to gas from northwest 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.”

The fields to be acquired by SSE from Total are new and will have relatively low operating costs. They are not yet producing gas, but the Greater Laggan Area development is expected to commence production later this financial year and peak production – at around five million therms of gas per day (of which SSE share one million therms per day) – is expected to be achieved during 2016.

The agreement comes at a time when SSE’s existing fields’ production volumes are expected to decline. In 2014/15 the output resulting from SSE’s ownership of gas production assets was just under 400 million therms. The acquisition should allow SSE’s average annual volumes of gas produced to be at a higher level than those it reported in 2014/15 until around 2020/21; and to remain above 200 million therms until around 2024/25.

The new Shetland Gas Plant is located close to Sullom Voe and will process and export produced gas and condensate from developments in the west of Shetland for onward delivery to the St Fergus Gas Terminal, making it one of the most important infrastructure developments in the UK.

It is expected to become fully operational in the course of this financial year and is expected to process and export gas and condensate for producers west of Shetland well into the 2030s.

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