29th Jul 2015 06:56
LONDON (Alliance News) - SSE PLC Wednesday said it has agreed to acquire a 20% stake in four gas fields offshore the Shetland Islands in the UK from Total E&P UK Ltd.
The gas fields surround the exploration acreage approximately 125 kilometres north-west of the Shetland Islands, collectively known as the Greater Laggan Area. SSE also will have a 20% stake in the gas plant servicing those fields.
SSE will pay a total of GBP565 million for the 20% interest and will invest a further GBP350 million between 2015 and 2018 to complete the entire development of those fields. That GBP350 million has been added to the company's development expenditure, of which GBP170 million will be recognised in 2015.
That will be funded through the company's plan to divest of around GBP5.50 billion of assets between 2015 and 2018.
Following the deal, SSE will hold a 20% stake, and Total will remain operator with a 60% stake. DONG Energy will retain its 20% holding.
"SSE acquired gas production assets in 2010 and 2013 and has regularly set out its intention to seek new opportunities to increase its asset base to help meet gas demand requirements. The acquisition will be in line with that and completes SSE's portfolio of gas production assets for the foreseeable future," said the company.
The gas fields are not greenfield sites so will have "relatively low operating costs". At its peak, the fields will produce around 5.0 million therms per day, of which SSE would net 1.0 million therms, which should start in 2016, but production will begin before the end of 2015.
"Production from the acquired fields is expected to be sustained at that [5.0 million therm] level until around 2020, before declining over the following 10 years without further development, making this a long-term investment," said SSE.
The new Shetland gas plant, in which SSE will also have a 20% stake, is located close to Sullom Voe and will process and export produced gas and condensate from developments in the west of Shetland for onward delivery to the St Fergus gas terminal, making it "one of the most important infrastructure developments in the UK," said SSE.
By Joshua Warner; [email protected]; @JoshAlliance
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