Total invests in North Sea oil field once viewed as too costly

Total is investing £2.5bn to develop entirely the Laggan and Tormore gas fields in the deep North Sea, more than 80 miles West of Shetland.

The fields had been ruled too expensive for commercial exploitation, because they are widely dispersed and lie in a highly hostile environment where the sea is 600 metres deep and, in winter, can produce 20 meter-high waves.

But recent tax changes aimed at boosting investment in the UK’s dwindling North Sea oil and gas sector, and a recessionary drop in industry contracting costs, have changed the economics of the programme, the French oil giant said.

The government signed off the plans yesterday, and construction will start immediately. Once up and running, Laggan and Tormore will produce 500 million standard cubic feet of gas per day from reserves estimated to be around 230 million barrels of oil equivalent. First production is planned for 2014 and over the course of the project’s life it will produce more than 1 trillion cubic feet of gas.

The investment also includes a new gas processing terminal as Sullom Voe on Shetland, creating up to 500 jobs during construction, and nearly 150 miles of new pipeline.

Yves-Louis Darricarrère, Total’s president of exploration and production, said: “In take the decision to develop this complex project, Total confirms its commitment to pursuing its investment in the North Sea and its long term objective towards helping to secure energy supplies for the UK.”

Energy Minister Lord Hunt said: “This is a huge step forward for the wider development of the West of Shetland area which still contains about a fifth of the UK’s oil and gas reserves.

“As we make the transition to a low carbon future, we must ensure we have secure energy supplies by making the best use of our indigenous energy through projects like Laggan and Tormore.”

Total owns 80 per cent of the project, with the remaining 20 per cent held by Denmark’s Dong Energy.