THE challenges of developing gas fields west of Shetland have been made more difficult because of the recent North Sea tax grab, a briefing on the frontier region will be told today.
Speaking in Aberdeen, the head of French oil major Total’s UK operation is expected to say its major North Sea gas project, Laggan-Tormore, might not have been given the go-ahead by it and partner Dong under the new tax regime.
Philippe Guys, managing director of Total E&P UK, is also due to say that while the firm had a six-well drilling campaign planned for 2012, the tax raid would put a questionmark on the level of future activities for it and others in the region.
Laggan-Tormore is a £2.5billion project involving nearly 90 miles of pipeline west of Shetland, a new gas plant on the mainland and a new export pipeline, with first gas planned for 2014.
Sanctioned in 2010, it was seen as key to unlocking further exploration in the region because of the new infrastructure being built, including extra capacity for possible third-party business.
But, according to Mr Guys, it was only tax allowances that helped “tip the investment balance”, adding: “I think the ongoing viability of west of Shetland as a new gas frontier needs to be viewed in that context and it is of the utmost importance that the Treasury takes into consideration the cases and considerations presented to them, in the context of the taxation task group work, nowadays and in the future.”
Mr Guys will address an Oil and Gas UK breakfast briefing on opening up the new gas frontier west of Shetland, at Aberdeen Exhibition and Conference Centre.
Paul Mason, Total UK’s new business manager, will say that opening up gas developments have been the subject of at least two taskforces, in the late 1990s and then 2007.
Development of Laggan-Tormore involved extensive third-party investment processes, at the request of the Department of Energy and Climate Change, to aid building pipeline infrastructure.
Issues around lack of infrastructure will also be included in a talk at the event by Justin Austin, managing director of OMV (UK), which has some key assets west of Shetland, including the Tornado discovery. He said ahead of the event: “The oil industry is very good at solving technical and commercial challenges, but political challenges, at least the tax part, we are not so good at.”
It is hoped projects west of Shetland could be subject of a new field allowance as part of work to help fields put under fiscal pressure by the UK Government’s increase in the supplementary charge on North Sea oil and gas producers in the 2011 Budget.
Total said last night it would stop production in Syria, in line with EU sanctions. A spokesman said it had informed the Syrian authorities it would halt operations with General Petroleum (GP) after the EU imposed sanctions on three Syrian oil firms, including GP as part of its to effort to add financial pressure on the Damascus government over a crackdown on protests.
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