A major new Shetland plant promises to bring gas to two million homes in the UK.
French company Total has started production on a massive new gas plant off the coast of the Shetlands. It is the largest construction project of its kind since the London Olympics and could provide enough gas for two million homes in the UK.
The Tormore and Laggan plan lies west of the Shetlands in an area of immense promise for the oil and gas industry. Estimates suggest that up to a fifth of all the UK’s remaining oil and gas reserves can be found in this area. The field lies on the edge of the UK continental shelf where depths can rise rapidly to more than 600 metres. Much of the area has been out of reach, and until now the fields have only produced oil.
The £3.5 billion project has been a long time in the making. The Tormore field was first discovered 30 years ago and neighbouring Laggan nine. The facility comprises three subsea wells from which gas is being transferred to an onshore Shetland facility capable of processing 500 cubic metres of gas per day. From there it will be piped to the mainland where it will move into the national gas grid. If Total’s optimism bears fruit, it could account for 8% of the UK’s gas needs – the equivalent of about 2 million homes.
The news is a major boom for the UK gas industry which has experienced a mini resurgence of late, however recent volatilities in the gas and oil price has raised questions about whether this and other deep sea projects can be commercially viable.
The new facility makes use of an innovative subsea to surface model – the first of its kind in the UK – which requires no infrastructure on the surface. As such, costs are kept to a minimum and if all goes to plan it should continue pumping for a further 20 years.
Determining how much oil and gas the UK industry can access is difficult, but it is thought that there could still be a substantial amount of oil and gas to be found. However, exploration costs in the North Sea are high and a low ratio of recent success means exploration activity has been limited. Total’s facility has been planned long term, which means it is viable even in a period of low prices.
The question is: will companies shoulder the high capital investments for new exploration projects given the uncertain environment?