Total's Laggan-Tormore gas development on track
The largest development on the UKCS is on schedule for first gas in 2014, but Total’s future investment may be influenced by the UK’s new tax regime
THE WEST of Shetland region on the North Atlantic margin is the final frontier on the UK Continental Shelf (UKCS). While a number of significant gas discoveries have been made in the region over several decades, the absence of infrastructure to carry the gas to market has left them undeveloped.
The development of the Laggan and Tormore gasfields, 124 km west of Shetland, and the creation of a brand new export infrastructure, will help unlock the 17% of the UK’s remaining oil and gas reserves, which would otherwise have remained stranded.
Already operating two mature and well established production hubs in the UK North Sea – Alwyn and Elgin/Franklin – Total sees west of Shetland as the natural location for a third UKCS hub, founded on the Laggan and Tormore fields and, potentially, the company’s 2010 discovery – Edradour.
Laggan was discovered in 1986 and was followed in 2007 by Tormore, 16 km to the southwest. But even combined reserves of 1 trillion cubic feet (cf) of gas and a peak production potential of 500 million cf/d represented only a marginal economic opportunity, given prevailing low gas prices and the huge investment required to build the necessary infrastructure.
Consequently, the March 2010 decision by Total and its 20% partner, Dong Energy, to proceed with the £2.5 billion ($4.1 billion) investment needed to develop Laggan-Tormore hinged on tax incentives offered by a UK government keen to see the west of Shetland region opened up and exploration activity increased.
Ironically, the benefits of those incentives were wiped out by surprise tax increases announced earlier this year. As Total’s senior vice-president for northern Europe, Patrice de-Vivies, explains: "Tax stability is really important and these changes were sudden and unexpected. The Laggan-Tormore field allowances from [the UK] government were essential in mitigating the price risk of gas at that time. Now, one year after the launch of the project, these tax benefits have been eaten away by the new tax system."
While Total has publicly reiterated its commitment to the Laggan-Tormore project – and progress since last year’s project sanction has been good – the company has said future investment plans on the UKCS will be subject to continuing review.
The overall Laggan-Tormore development concept comprises a tie-back of nine subsea wells, connected by two 18-inch flowlines to a new onshore gas-processing facility beside the existing Sullom Voe oil terminal on Shetland. Processed gas will be exported by a 234 km, 30-inch pipeline to the North Sea Frigg UK system and on to the St Fergus gas terminal, 60 km north of Aberdeen.
To catalyse further field developments, either by Total or third-party operators, both the import and export pipelines have tie-in points and the link from the onshore gas plant into Frigg UK has capacity available above and beyond Laggan-Tormore’s requirements.
Earthworks for the onshore gas plant are complete and contractor, Petrofac, is about to start construction work on the plant itself. At the height of the programme, up to 800 workers will be on site, for whom a dedicated accommodation centre has been built with all the facilities necessary to minimise any burden on services provided for the local Shetland community. Once completed, the gas plant will run with a core staff of about 70.
The fabrication of pipelines and subsea systems is progressing at locations worldwide. With more than 100 km of the two import pipelines successfully laid from Shetland towards the Laggan and Tormore fields, the project is on schedule to deliver first gas in 2014.
As well as the technical and logistical challenges of bringing to fruition the largest development anywhere on the UKCS, the unique nature of Shetland and the waters around its coastline present environmental challenges. One of the first, concerned dealing with huge volumes of peat excavated as part of onshore construction work – a sensitive issue on some past developments on Shetland.
Dealing sympathetically with the peat was seen as critical by environmental regulators, local authorities and the Shetland community. Total’s Laggan-Tormore project director, Robert Faulds, explains: "The area where the gas plant is being built was covered in a 5 metre layer of peat, which had to be cleared before work could begin. The ecological importance of the peat meant working closely with stakeholders to agree the best solution."
That solution is to keep up to 700,000 cubic metres of peat on site, in specially constructed stores that form an integral part of the site’s landscaping, before reinstating it at the end of the plant’s 30-year life. It will be closely monitored throughout to ensure it remains alive and suitable for reinstatement. Storing peat in this way is a world-first and is just one example of the environmental commitment on the Laggan-Tormore project, but there are many others.
The area around the gas-plant site has breeding populations of very rare birds, which must be protected – especially when nesting. During the breeding season, environmentalists survey the site daily and establish 30 metre exclusion zones around nests. The whole site lies in a Special Conservation Area that protects the shallow waters and the seabed habitat, as well as the coastline and the otters and seals living there.
"Following consultation, we have agreed work patterns to control the impact on these areas," explains Faulds. "This includes halting pipeline construction in inshore waters from early June to late August. Although this cuts the working season from six months to just three, it protects vulnerable seals during pupping and moulting." Marine-mammal observers are ensuring dolphins, whales and porpoises are protected from any adverse impact from the project.
Faulds says: "As work gathers pace on Laggan-Tormore, our role as custodians of the environment becomes ever more apparent and important. It’s a duty we remain fully committed to, not only during construction, but throughout the project’s operational life."
By Brian O’Neill, Total E&P UK