Major U.K. Gas Field Produces First Gas

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--French oil and gas company Total S.A. (NYSE:TOT) (Paris, France) has started production of its first natural gas from the £3.5 billion ($5 billion) Laggan-Tormore project, located 70 miles west of the Shetland Islands, north of Scotland.

The gas and condensate fields, located in 600 meters of water, will produce 90,000 barrels of oil equivalent per day (boe/d) and represent one of the U.K.'s largest deepwater fields. It will be capable of supplying enough gas for approximately two million households, equivalent to 8% of the U.K.'s energy needs.

"Laggan-Tormore is a key component of our production growth in 2016 and beyond," explained Arnaud Breuillac, president Exploration & Production at Total. "The innovative subsea-to-shore development concept, the first of its kind in the U.K., has no offshore surface infrastructure and benefits from both improved safety performance and lower costs. By opening up this new production hub in the deep offshore waters of the West of Shetland, Total is also boosting the U.K.'s production capacity and Europe's energy security."

Laggan-Tormore consists of a 140-kilometer tie-back of four subsea wells to the new onshore Shetland Gas Plant, which has a capacity of 500 million standard cubic feet per day. Following treatment at the gas plant, the gas is exported to the mainland via the Shetland Island Regional Gas Export System (SIRGE), and the condensates are exported via the Sullom Voe Terminal.

The commissioning of Laggan-Tormore comes at a very difficult time for the oil and gas industry globally, with the continued collapse of the price of crude oil. Energy consultancy Wood Mackenzie forecasted recently that up to 50 North Sea oil and gas fields could cease production this year as crude prices continue to drop. It added that output will stop at 140 offshore U.K. fields within the next five years, even if crude prices recover from their $35 per barrel low. In the same timeframe, just 38 new fields are expected to be commissioned.

Deirdre Michie, chief executive at industry body Oil & Gas U.K., welcomed the commissioning of Laggan-Tormore. "The confirmation of first gas production from the Laggan-Tormore field is very welcome news at a challenging time for the U.K. oil and gas industry as a whole. Developing the field attracted billions of pounds of investment to the U.K., employed thousands of people and required technological innovation over many years. Production from the field will supply a significant proportion of the U.K.'s gas needs, supporting energy security at a time of sustained dependence on gas as a fuel."

She added: "Investment in Laggan-Tormore was made possible by the introduction of a tax allowance for deepwater gas developments several years ago. The significant economic contribution made by the project illustrates how changes to the tax regime can be a real enabler in maximising the economic benefit from our oil and gas reserves."

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