By ROSALIND GRIFFITHS
SULLOM Voe Terminal could potentially become a hub for reception of gas from new fields west of Shetland, according to Alex Kemp from Aberdeen University.
In a presentation to the SIC harbour board yesterday, considering future uses for the port, Professor Kemp said there was current interest in 20 undeveloped fields west of Shetland, an area in which many other small and scattered fields have also been discovered. For an area to be viable a cluster of fields is needed. These fields would require a communal hub for processing and could use a communal pipeline, probably to St Fergus.
Three possible options for hubs are being considered by the task force set up by BERR (Department for Business, Enterprise and Regulatory Reform) and the investors in the region. One is onshore at Sullom Voe, which would involve transportation of mixed gas streams to the terminal. A new processing plant would have to be built and the gas liquids separated from the methane. The methane would then be transported in a new pipeline to St Fergus.
This option would have long-term consequences as although only a few fields (possibly five) would be involved initially, having the infrastructure in place could encourage future development.
Other possibilities for hubs include a shallow water hub, possibly based at the Victory field, with gas going direct to St Fergus and gas liquid to Sullom Voe, and a deep water hub at the Laggan field, again with gas going to St Fergus and gas liquid to Sullom Voe.
A hub at Sullom Voe would be cheaper to build as men and materials would not have to be transported offshore, but the pipeline costs, currently £2 million per kilometre, would be greater. There could also potentially be loss of pressure in a long pipeline. But, Prof. Kemp said, it would be important to try to get the hub to Sullom Voe or the benefits could pass us by.
According to his report, the idea of SIC investing in any new development, whether a new gas processing plant or a pipeline, is worth considering.
Other possible uses for the terminal could be for an oil storage reserve, a transhipment centre for oil cargoes, a reception for liquefied natural gas (LNG) from countries such as Norway, gasification at Sullom Voe and transmission by pipeline to St Fergus, transhipment of LNG between tankers, a gas liquefaction plant, a shore base for west of Shetland oil and gas exploitation or other non-gas or oil activities.
Sullom Voe could be used to store oil as an EU directive requires the UK to maintain oil stocks equivalent to 90 days of the average daily consumption of the preceding year in three separate categories of fuel – gasoline-based products, gas oil, diesel oil and kerosene-base fuels and fuel oil.
As the UK is an oil producer, it currently has a derogation of 25 per cent, allowing it to hold 67.5 days’ worth, but with the decline in production from the UK continental shelf, and the fact that since 2006 the UK has been a net importer of oil, this will gradually increase to 90 days. Stocks of crude oil are also taken into account because of its refining yield.
Sullom Voe has spare storage capacity and could store the required amounts of fuel for other countries such as Ireland and Belgium, Prof. Kemp said.
Transhipment is another option for the future of Sullom Voe, with oil from areas such as Russia being either directly transferred from medium-sized to larger tankers, or transferred after discharge and blending at the terminal and bound for destinations such as the USA.
But there is uncertainty about Russian oil production, and whether medium-sized tankers would continue to be used.
The idea of Sullom Voe becoming a reception for LNG from Norway is also problematical, as there currently exist terminals in England and Wales where shipping the LNG is likely to be more competitive.
Transhipment of LNG has also been considered. It would be used if the tanker importing LNG is too large for the harbour facilities and would need to be transferred to a smaller tanker, but it is unlikely this would involve substantial and regular work.
Building an LNG liquefaction plant at Sullom Voe is unlikely to be cost effective given the uncertainty of reserves. The same is true for using the terminal for a supply base for west of Shetland oil and gas exploitation. Such a base would only be economic if activity in the area were to increase.
The location of Sullom Voe is a disadvantage for non-oil and gas uses. In theory the terminal could be used for the import and export of bulk commodities, but the distance from markets probably makes it uncompetitive.
Councillor Betty Fullerton, who was at the meeting, said it was important that Sullom Voe should become a hub. It will be up to the council to decide whether that happens or not.