SSE has 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; and a 20% interest in the new Shetland Gas Plant. Total E&P UK Limited is the operator of, and owns a 60% stake in, these assets. The remaining 20% is owned by DONG Energy.
Gas production started in February 2016 from the Laggan field and in August 2016 from the Tormore field which have reached peak production of up to 90,000 boe a day. This will help to secure energy for SSE’s customers and help meet the needs of SSE’s gas-fired power stations, contributing to security of electricity supply. The nearby Edradour and Glenlivet fields are expected to start production in 2017 and 2018 respectively and should keep production at peak rates through to 2020.
The new Shetland Gas Plant is located close to Sullom Voe and processes and exports produced gas and condensate from developments in the west of Shetland for onward delivery to the St Fergus Gas Terminal for gas; and via the Sullom Voe Oil Terminal for liquids. This makes it one of the most important infrastructure developments in the UK. Production also started in February 2016 and it is expected to process and export gas and condensate for producers West of Shetland well into the 2030s.
Overall, in addition to helping meet SSE’s gas demand requirements, the acquisition is expected to create value over the long term, despite the current impact of lower gas prices, and represents SSE’s focus on maintaining a balanced range of energy businesses across its portfolio.
SSE’s UK Continental Shelf upstream portfolio is predominantly gas weighted with only associated liquids and as per the independent Reserves Audit, at 31 March 2016, SSE’s total economically recoverable net proven plus probable (2P) reserves, taking into account all technical and economic variables, was estimated to be 3.6 billion therms (58.8 mmboe) in all of the fields in which SSE has an ownership interest.
Monitoring developments in gas production
SSE currently has no involvement in any shale gas operations. It is, however, continuing to monitor the development of shale gas in the UK and the proposed fiscal and tax regimes surrounding its potential exploitation.
Gas Production priorities for the 2015/16 financial year include:
- ensuring the safe operation of all the assets in which it has an ownership interest;
- stringent cost control on operator budgets and enhanced monitoring and reporting of operator work programmes; and
- continuing the robust investment appraisal process to identify potentially suitable acquisition targets.