WIREDGOV

Alex Salmond recently announced a £10 million funding package to support plans for a deep-water quay facility in Shetland to secure decommissioning work on major offshore structures from the Northern North Sea.

Following a meeting in Oslo on Tuesday with senior executives of AF Group and Lerwick Port Authority, the First Minister recently said the Scottish Government and Highlands and Islands Enterprise would each make up to £5 million available to support the ambitious project, which will create in the region of 150 new jobs in Shetland and Aberdeen at its peak activity.

LPA signed an exclusivity agreement with the Norwegian firm’s subsidiary, AF Decom Offshore UK in 2010 to develop the project, which aims to establish a centre of excellence at Dales Voe, incorporating a 24-metre deep quay and oil rig decommissioning yard, to provide a scale of capacity and environmental standard currently unmatched in the UK.

The funding offer agreed is subject to an appropriate financial business case being completed, and the project securing the remaining finance, consents and contracts necessary to proceed.

The First Minister said:

“North Sea oil and gas remains a huge economic driver, both for the UK and for Scotland. With as much as £1.5 trillion worth of reserves still remaining to be extracted, alongside increasing export activities from Scottish firms, it will continue to play an important role in Scotland’s economy well into the middle of this century.

“Decommissioning is an increasingly important activity for companies in Scotland, Norway and elsewhere.  I’m determined that the Scottish Government and our enterprise agencies will do everything we can to support the continued success of the industry in Scotland - to create jobs, promote economic activity in the oil & gas supply chain and encourage skills development and wider opportunities in communities such as Shetland.

“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.”
 
Sandra Laurenson, Chief Executive of Lerwick Port Authority said:

“Today’s announcement is very welcome and we are delighted that the Scottish Government and Highlands and Islands Enterprise recognise the importance of offshore decommissioning to Shetland and are supporting it in this way. 

“The project to create a deep-water site for the UK offshore sector will bring benefits to the area through employment and the wider supply chain.  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. Lerwick Port Authority values the engagement with our partners in developing the project to this stage and the funding now secured provides a fantastic platform to ensure its delivery.”

Pal Egil Rønn, Chief Executive, of AF Group said:

“The AF Group is pleased with the support and co-operation from the Scottish Government and HIE in our company’s long-range and major investment plans up at 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.“

Calum Davidson, Director of Energy and Low Carbon, Highlands and Islands Enterprise, said:

“HIE has been working with Lerwick Port Authority and the industry for some years now to ensure we are ready to capture emerging opportunities in oil and gas decommissioning. Today's announcement is a major step forward which will build on Shetland's strong track record in major decommissioning projects.

“Decommissioning is an important and growing part of the international oil and gas industry which could bring significant economic benefits to Scotland for decades to come. Geographically, Shetland is a key strategic location for this project, and we have the infrastructure, the skills and the experience to make it happen. HIE looks forward to working with our partners in government and other organisations to drive this major project forward.”

Pictures of the First Minister’s visit to Norway are available for download at the Scottish Government's Flickr page.

The AF Gruppen ASA, headquartered in Oslo, is one of Norway’s largest civil engineering and construction companies, with 2,500 employees in Norway, Sweden, Poland and China.

In February 2010, AF  signed an exclusivity agreement with Lerwick Port Authority to establish a decommissioning centre of excellence for the North Sea in Lerwick. In addition to the main decommissioning activity, the proposed facility could also be equipped to undertake secondary projects such as maintenance of rigs; ship dismantling; reception of subsea installations; supply base for offshore industry; traditional port services; construction for offshore market; topsides; jackets and subsea installations.

Although there are many years of productive life left in the North Seas and new discoveries are still coming on line, a steady stream of offshore installations in the North Sea are approaching  the end of their design life, and demand for onshore demolition facilities is growing. The total market value of decommissioning over the next 30 to 40 years is estimated to be just over £30 billion.