News / BP and Shell extend life of Schiehallion
OIL GIANTS BP and Shell are to invest £3 billion redeveloping the Schiehallion and Loyal oil fields west of Shetland to extend production beyond 2035.
The fields have produced nearly 400 million barrels of oil since production started in 1998 and an estimated 450 million barrels are still accessible.
At present oil from Schiehallion is taken to Sullom Voe oil terminal by shuttle tanker, however the contract runs out next year and there are no guarantees it will be renewed.
The £3 billion investment, described as the Quad204 redevelopment, will see the existing Schiehallion floating, production, storage and offloading (FSPO) vessel replaced by 2015, with production due to commence the following year.
Shetland Islands Council harbour master Captain Roger Moore welcomed the decision, saying he was pleased the oil industry was continuing to develop the west of Shetland.
“It is good news that BP and its partners are investing in the west of Shetland and we hope to ensure continued business with them,” he said.
The council’s political leader, Josie Simpson, added that the local authority needed to continue working on streamlining harbour operation to keep costs down and remain competitive.
However deploying a new FSPO will mean that production will have to cease for about a year during which the harbour and Sullom Voe terminal will inevitably suffer a downturn in business.
BP currently has a two year rolling contract with the terminal to take Schiehallion oil into Sullom Voe. The contract is due for renewal next year and there is no indication as to BP’s plans once the new FSPO is in operation.
Some industry observers speculate that BP might consider taking the oil straight to market bypassing Sullom Voe altogether, while others believe taking the oil by shuttle tanker to the terminal continues to be the safest and most cost effective method.
The new vessel will be 270 metres long, 52 metres wide and able to process and export up to 130,000 barrels a day of oil, with storage in excess of one million barrels.
There will also be a major investment in the upgrading and replacement of the subsea facilities to enable the full development of the reserves, BP said on Wednesday morning.
Trevor Garlick, regional president for BP’s North Sea business, said the investment decision was an important milestone.
“The Schiehallion and Loyal oil fields are established assets with a strong future – and we and our co-venturers are taking some significant steps to maximise the greater potential we now see in these fields.”
BP said it had developed a strong track record west of Shetland over the past two decades and would use the latest technology to maximise recovery from these fields.
Bob Dudley, group chief executive of BP, added: “This decision is another example of BP’s strategy to deliver long-term value growth through investing in the large fields and in key basins where it has extensive knowledge.
“BP has over 40 years experience in the North Sea, during which time it has developed a strong set of assets. We are committed to growing and maintaining a material, high quality business there for the long term.”
BP will have a 36.per cent ownership interest in the new FPSO, with other interests as follows: Shell (36.3 per cent); Hess Ltd (12.9 per cent); Statoil (UK) Ltd (4.8 per cent); OMV (UK) Ltd. (4.84 per cent) and Murphy Petroleum (4.84 per cent).
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