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Treasure island: Ben Hargreaves visits Shetland's Sullom Voe oil and gas terminal, which is being revitalised for at least another 20 years of productive life.

Oil major BP is a company in transition, and nowhere is this more the case than in the North Sea. Three summers on from the Deepwater Horizon disaster in the Gulf of Mexico, a leaner BP has emerged, shorn of $3 billion of mature assets in the southern North Sea and still more in its central area.

Globally, the company has sold off 50% of its upstream installations, 50% of its pipeline lengths, a third of its wells, and 10% of its reserves. The Macondo crisis, the company admits, meant it had to reduce the amount of infrastructure it operated.

But the company also saw an opportunity: to divest itself of mature assets and to invest in areas where there was potential for greater growth, it's this strategy that is leading to the rejuvenation of an oil and gas terminal on Shetland that would otherwise be facing an uncertain future.

If it's a stripped-down BP now operating in the North Sea, the oil and gas infrastructure it commands is still impressive. The Sullom Voe terminal on the north of the mainland of Shetland is a case in point, a sprawling 1,000-acre complex dedicated to storing and processing oil and gas piped from fields to the east and west of the island.

Designed in the mid-1970s, the terminal was built to take in oil and gas from the Brent and Ninian fields to the north and east. In its heyday it was processing 1.5 million barrels a day, and the workforce during construction peaked at 6,000. Now there are 200 BP staff on site and 400 contractors. Oil still flows in, but at much lower volumes. "The west of Shetland is where the terminal's future will come from," says Arthur Spence, Sullom Voe manager.

Sullom Voe, which is on the same latitude as Anchorage, Alaska, has already outlived its design life of 20-25 years. It took in its first oil from the 36in pipelines from Brent and Ninian in 1978. In the early part of this century there were job cuts following a restructuring in 2002, when throughput was 600,000 barrels a day. It was thought then that the terminal was unlikely to remain in operation beyond 2015.

Times have changed. Mike Tholen, economics director at trade body Oil and Gas UK, says: "The industry off Shetland kicked off in the 1970s, and when I entered the oil and gas sector in the 1980s there was no real idea that it would be around beyond 2000.

"We're looking at an industry that has much greater longevity than anyone envisaged--and we're still coming to terms with that within the business.

"Investment in the UK continental shelf has risen to 13 billion [pounds sterling]. You're seeing an industry that is pursuing some very big targets and also putting a lot of money into rejuvenating and prolonging the life of existing fields and infrastructure."

The Shetland terminal is a good example of this--it's being revamped and refurbished with a view to extending its life for another 20 years. It is now thought that staff numbers will double over the next decade, says BP.

The reason is the successful exploitation of oil and gas fields to the west of Shetland.

Of prime importance among these is the Clair development, which first produced oil in 2005. Sullom Voe had to compete with a sister terminal in Orkney to be "tied in" to transport oil and gas from Clair. The field is now likely to play a major role in sustaining the terminal over the next two decades.

Peter Miller, vice-president of BP's midstream North Sea business, says: "Clair's quite something: the biggest oilfield in Europe, with something like eight billion barrels in place." The first phase of its development produced 40-50,000 barrels of oil a day for 300 million [pounds sterling] of investment. Subsequently, in 2011, BP formally sanctioned as exploitable another part of the field known as Clair Ridge, and is putting up platforms to drill it.

BP first realised that Clair contained oil in the 1970s. The development of horizontal drilling technology and a better understanding of the area's geology in the decades since then has allowed the asset to be successfully drilled today, and Sullom Voe to store its oil.

"We knew the oil was there," says Miller. "The question was, would we be able to get it out?" Because the oil is heavier than Brent crude there were some concerns that it might "wax up" in the pipeline, says Spence. These proved to be unfounded.

BP's decision to focus on newer fields with large reserves rather than on mature assets is paying off, Miller believes. "Is it a gamble? Oil is a risky business," he says. "But the face of BP in the North Sea is changing dramatically.

"It's taking fields that are declining and we know how long will last and swapping them for fields that are in their infancy, and I include Clair in that. We will see production increasing and massive investment."

It is thought that a quarter of Britain's recoverable oil and gas is in the west of the Shetland basin, says Oil and Gas UK.

Miller says: "My son is 15 and if you'd asked me a few years ago if he could have an entire career in the North Sea I would have said no. But Clair could be producing until 2040. And that reservoir means a 60-year life for Sullom Voe."

In terms of getting more out of long-serving assets, gas pumped to Sullom Voe is being transferred to the mature Magnus field to the east of Shetland to facilitate enhanced oil recovery operations. The gas is cleaned, scrubbed and injected into the reservoir to drive out oil.

"Were that not the case, Magnus would have shut down years ago," says Miller.

Sullom Voe is classified as strategically important to the UK, and about a third of the country's oil has passed through the terminal over the past 30 years. The terminal is critical to Shetland's economy, although oil and gas is actually the island's second industry after fishing.

The gas coming into the terminal is used to fire a 100MW power station that supplies Sullom Voe's electricity and also feeds power to the grid. The power station is an important back-up for a diesel-fired plant that supplies most of the island's electricity. Sullom Voe's liquefied natural gas tanks are disused as the fields no longer produce enough gas for export. Gas that isn't used on the island--or at Magnus--is burnt in a flare stack.

Shetland is ranked highly for quality of life, and Sullom Voe provides lifelong careers for local residents, says Alastair Cooper, chair of the development committee at Shetland Islands Council.

"Oil has stabilised the local economy," he says.

He adds that it is important that BP and its partners--it works with more than 20 other oil industry companies that have stakes in fields or in the terminal operations--respect the environment. "But if BP wasn't here it would take a lot of well-paid, skilled jobs out of the economy." Shetland has a population of just over 23,000, and the unemployment rate is low.

Tholen of Oil and Gas UK says: "Without oil, Shetland would be very different. And, like other engineering industries, there is competition for skills: the jobs pay well and companies in the North Sea are actively looking for recruits."

This means that Sullom Voe may struggle to get the workers it needs as newer projects to the west of Shetland begin to produce large volumes of oil.

Miller says: "BP remains committed to local recruitment but the island is simply unable to supply trained technicians in the numbers required in the future." The terminal is already making use of staff based in different parts of the UK and taking advantage of the fact that Aberdeen, Inverness and Edinburgh are a day's travel away.

And workers have to cope with some ageing infrastructure. Tholen says: "The challenge now is that we are working on stuff that was never designed to be running so long." Sullom Voe has had a reprieve and now BP must prepare it for the coming decades. For the people of Shetland, it is good news.

"The business will be different 20 years from now, but it will be here," he says.

Miller concludes: "There is a huge amount of investment in the west of Shetland: a huge new frontier, if you will. Sullom Voe is perfectly placed to be the export route, but it means that there has to be a modernisation process of renewing plant and equipment. That means a whole new lease of life."

It is a scenario that probably never crossed the minds of the plant's original engineers way back in the 1970s.

Go west for licences

BP is not the only big oil company to show an Interest in oil and gas to the west of Shetland. The Faroese trade and industry minister has awarded licences for six oil and gas "blocks" to Dong Energy, which recently announced results from two exploration wells drilled nearby at the end of 2012 and early in 2013.

The block licences ere in the Faroe-Shetland Basin, west of the producing British fields Foinaven and Schiehellion, and Dong Energy has been awarded operatorship and a 100% Interest. The company said the awards made it one of the major players in the west of Shetland region.

"It's classed as a reasonably frontier region and therefore we can get in at ground level, which is very good for a company of our size," says Simon Slater, Dong's director of UK assets and facilities.

"It's also one of the last major undeveloped areas around the UK continental shelf--obviously the Faroes border that. They will provide us with the opportunity to build long-term infrastructure hubs." These are likely to include both transport and processing plant.

Slater adds that Dong has been active in the region since 2000 with nine major discoveries but acknowledges that the industry in the North Sea is changing. "Things that were thought of as insurmountable challenges in the 1970s are more accessible now," he says. "It is a challenging environment to operate in but the industry has more exportise working in deep water."

The risk has great potential rewards, says Slater. "We don't know exactly what's down there but we see west of Shetland as a prospective area with the potential to hold large volumes of the remaining oil and gas for the UK.

"Technologically, the fact that we can develop deep-water fields means we're ready to take on some of the challenges of harsh environments."

Will there be further discoveries of oilfields on the scale of Clair? Mike Tholen of OU and Gas UK says: "it's a brave parson who says there's another massive field out there. Our biggest opportunities may lie in existing fields, and part of the battle is to get the most out of them.

"If you looked at the Shetland industry in the 1980s, you might have said it was a jolly good wheeze, but you never would have seen it lasting. But we've actually seen waves of investment."
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Title Annotation:ENERGY
Author:Hargreaves, Ben
Publication:Professional Engineering Magazine
Geographic Code:4EUUK
Date:Aug 1, 2013
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