French energy giant Total has started extracting gas from the first gas field in the UK located in a challenging ocean environment in the west of Shetland, despite the ongoing crisis in the oil and gas sector.
The £3.5bn development at the Laggan-Tormore gas fields uses four wells extracting gas from depths up to 600m and features no offshore surface infrastructure, which, Total said, makes the project inherently safer and cheaper.
"It's a uniquely challenging environment in which to operate, but also one with great potential," said Arnaud Breuillac, Total’s President of Exploration and Production. “By opening up this new production hub in the deep offshore waters of the West of Shetland, Total is also boosting the United Kingdom’s production capacity and Europe’s energy security.”
The field, which is geographically closer to the Atlantic Ocean than the North Sea, has so far only been explored for oil. Total estimates the field would produce 90,000 barrels of oil equivalent per day in gas, which will be transported through sub-sea pipelines to the new onshore Shetland Gas Plant for processing.
DONG and SSE also have interests in the project, which has been described as the first of its kind in the UK and the largest construction project in the UK since the Olympics.
The beginning of operations at the Laggan-Tormore gas fields has been hailed as good news for the struggling UK oil and gas sector. Hit by the ongoing oil price crisis, oil and gas companies have been forced to cut a staggering 65,000 jobs since 2014, the industry body Oil and Gas UK has estimated. Analysts fear the worst may still be ahead. According to consultancy Douglas-Westwood, almost 150 oil rigs in UK waters could be scrapped within the next decade.
"This is an important first for Total, Shetland and the wider UK economy,” Shetland MSP Tavish Scott commented on the Laggan-Tormore project. “There is nothing but doom and gloom from some about the future of oil and gas. Yet the prospects for west of Shetland developments look positive."
In addition to switching to gas extraction, further opportunities for the UK industry may arise from decommissioning old oil rigs. Douglas-Westwood recommends North Sea companies should stop extending operations of already obsolete rigs, which are too expensive to operate and uneconomical in the current climate.
"The oil price collapse has been bad news for nearly every company involved in the industry, but one group that could actually benefit from it are specialist decommissioning companies,” Douglas-Westwood said in a statement.
"For these companies there is an opportunity to be part of removing the huge tonnage of infrastructure that exists in the North Sea. With oil prices forecast to remain low, life extension work that has kept many North Sea platforms producing long past their design life no longer makes commercial sense."
The consultancy predicts that the "UK will dominate decommissioning expenditure" due to the "high number of ageing platforms in the UK".
“Whether our governments like it or not, the future of North Sea oil is more uncertain than ever and thousands of people will lose their livelihoods unless we secure work in areas like decommissioning and renewables,” said Scottish Green Party co-convener Patrick Harvie.
"Governments both in Westminster and here in Scotland like to pretend that by throwing subsidies into the North Sea, we can make the oil industry last forever. But while they sit around and hope for the best, valuable opportunities to take a leading position in the decommissioning sector are floating by.”