Plans to turn the Dales Voe base into the UK’s biggest and most modern oil platform decommissioning yard have received a £10 million funding boost today from the Scottish government.
First Minister Alex Salmond announced the support in the Scottish Parliament following his visit to Norway earlier this week for talks with Lerwick Port Authority and Norwegian decommissioning specialists AF Group.
The port authority signed an agreement with the Oslo-based company in 2010 to develop the little-used base north of Lerwick, dredging and building a new quay to a depth of 24 metres and creating a vast yard for dismantling offshore platforms.
The so-called centre of excellence in decommissioning, which will cost a total of £50 million, could create up to 80 jobs in Shetland with additional spin-offs for local companies.
The base aims to capture a share of the lucrative and expanding trade in scrapping old oil rigs but could also attract a wide range of other activity too, including rig repairs – which it was originally built for in the early 1980s – scrapping ships and constructing offshore installations, such as topsides, jackets and subsea equipment.
Mr Salmond said: “Lerwick has already established itself as one of the main deep-water harbours in the Northern North Sea, with extensive experience in the offshore oil and gas and decommissioning sectors.
“I was pleased to meet with Lerwick Port Authority and the AF Group representatives to discuss their ambitious plans and delighted to be able to confirm that we are making up to £10 million available for their ambitious deep-water quay project.”
He is putting pressure on the UK government to match the funding.
Funding of £5 million each is to be made available from the government and its agency Highlands and Islands Enterprise for the project which the government said would provide a scale of capacity and environmental standard currently unmatched in the UK.
Overall, in the region of 150 new jobs will result from the development, many of them in Aberdeen.
The funding still depends on the completed financial business case and the project securing the remaining finance, consents and contracts necessary to proceed.
The Dales Voe base has several key strengths, including its deep water access to handle the massive heavy-lift ships used to bring oil rig and its position close to oil and gas fields in the Northern North Sea and the new province west of Shetland.
The First Minister said North Sea oil and gas would continue to play an important role in Scotland’s economy well into the middle of this century with reserves worth up to £1.5 trillion still remaining to be extracted.
In addition, the scrapping of old and redundant structures from declining oil and gas fields could be worth over £30 billion in the next 30-40 years. In the next decade 82 installations in the central and northern North Sea are due to be decommissioned.
The new base, operated by AF Group, will be the biggest single infrastructure development among the many carried out by Lerwick Port Authority. LPA chief executive Sandra Laurenson welcomed the announcement and expressed delight that the Scottish government recognised the importance of offshore decommissioning to Shetland.
She said the funding provided “a fantastic platform” to ensure delivery of the new base. “The planned significant investment in new port infrastructure allows us to look forward to the next phase of Lerwick’s capability in meeting the needs of the oil and gas industry for many years to come.”
AF Group chief executive Pal Egil Rønn said his company was pleased with the support for its long-range and major investment plans for Shetland. “AF wish to bring our experience from development and operations of similar business in Norway to develop a unique site when it comes to operational and environmental standard for the UK market.”
HIE director of energy and low carbon, Calum Davidson, who spent some of his childhood in Shetland, said his agency had been working with the LPA for some years now to capture emerging opportunities in oil and gas decommissioning. He added: “Geographically, Shetland is a key strategic location for this project and we have the infrastructure, the skills and the experience to make it happen.”
The AF Group is one of Norway’s biggest civil engineering and construction companies. It has a similar base to that proposed for Lerwick at Vats in south-west Norway, which employs 80 people.
Until now the site of decommissioning work in Shetland has been the Greenhead Base. A large module from the Frigg field was scrapped there in 2007/08.