Pete Bevington

17 August, 2007

ENERGY multinational BP yesterday (Thursday) announced it would carry on shipping oil from its Schiehallion field west of Shetland into Sullom Voe terminal for another two years.

In a surprise move, the company has taken up an option to extend its contract with Sullom Voe, due to run out next year, until September 2010.

The move has been welcomed by Shetland Islands Council which operates Europe's largest oil exporting harbour, where oil traffic has dwindled from its peak in the mid 1980s.

Industry insiders have suggested the contract extension might prelude a decision to link the Schiehallion and neighbouring Foinaven oil fields into a single operation, shipping their combined production to a single port.

However whether such a move would take place by 2010 when Foinaven crude currently carries a premium price over Schiehallion is doubted by others.

In 1997 Sullom Voe beat Flotta terminal, on Orkney, to win the Schiehallion contract, after losing Foinaven to their southern neighbours in 1995. The five year Schiehallion contract was renewed in 2003.

Currently Schiehallion produces 60,000 barrels a day, which is shipped to Sullom Voe on the shuttle tanker Loch Rannoch once every seven to 10 days. Maximum production has been 120,000 barrels a day, and could reach that again once various technical issues have been resolved.

The 425 million barrel field is expected to stay in production until 2020. Next year it is scheduled to close for tow months for a maintenance programme.

Yesterday BP confirmed that they had exercised the option to extend the 2003 contract with Sullom Voe by two years.

Terminal manager Neil McCracken welcomed the news, saying: ""This extension is a reflection on the high level and quality of service provided to the Schiehallion business by SVT."

SIC convener Sandy Cluness described it as "very good news for Shetland". He said: "This clearly indicates to us that the considerable efforts made over recent years to improve efficiencies mainly through combining towage and pilotage operations have paid off."

SIC harbour board chairman Alastair Cooper said the announcement had come as a surprise, but a very welcome one. "This gives the port stability over the next few years and enables all efforts to be brought to bear on finding new business opportunities for Sullom in the future which are currently looking bright," he said.

Prospects for Sullom Voe include the new oil discovery by Chevron in the Rosebank/Lochnagar field west of Shetland, and gas being piped in by Total from their newly discovered Laggan field.

The enormous Clair field west of Shetland is still only producing 37,000 barrels a day pieped straight into the terminal, but has a long term future. However trans shipments of Russian oil, one of the great future hopes, have vanished from UK ports as a whole this year.