Terminal could still get new gas

By NEIL RIDDELL

THE UK government has insisted that Sullom Voe remains “in the mix” as it continues to examine how best to bring new oil and gas discoveries ashore.

It has been suggested that Labour is keen to bypass Scotland with the new finds to protect the UK’s future revenue in the event that Scotland became independent but, speaking to The Shetland Times on a visit to the isles this week, Scotland Office minister David Cairns said he could “categorically quash” that notion.

Mr Cairns said no decision had yet been taken on how best to maximise the UK’s benefit from the new discoveries to the west of Shetland.

“The possibility of Scottish independence is not a factor in any of those discussions at all. The decisions taken in relation to Sullom Voe, St Fergus, the north east of England, will be taken on the basis of what makes business sense.”

A taskforce comprising major oil companies including Total and BP, along with other smaller companies and the Department for Business, Energy and Regulatory Reform (DBERR), is currently investigating how to maximise the potential of the discoveries and Mr Cairns said it was still too early to say whether any of the new finds would be brought ashore at Sullom Voe.

“It’s certainly in the mix,” he said. “There’s an understanding that it’s not something any one company can do, the challenges are so great. [We need] some sort of solution to bring together various partners in sharing some of the infrastructure. There’s very little infrastructure compared to the North Sea.

“There’s obviously a range of options for what happens with oil and gas and it’s too early at this stage to bring forward any answers, but the option of Sullom Voe is clearly on the table.”

But MSP Tavish Scott said he was aware of concerns over the government’s plans and described it as “the most deeply worrying situation facing our islands at this moment”, adding that it was an issue over which he and isles MP Alistair Carmichael would be working closely with the SIC.

Mr Scott said: “If we are to lose oil business and if Sullom is now being hurt by wrangling between the Scottish and London governments, that is utterly unacceptable. It’s a very deeply concerning issue because Sullom Voe has been an absolute cornerstone of the islands’ economy since the 1970s and I want it to stay that way.”

After a visit to Sullom Voe, Mr Cairns said it was clear the oil industry had a viable medium term future in the North Sea and said he had detected a significant commitment from the oil companies operating at the terminal.

“With modern technology you can do some of the same processes that you used to need a lot more kit for more efficiently,” he said. “The kind of facilities we needed in the heyday of production for the North Sea, in the mid to late 1990s, aren’t going to be needed any longer.

“But I don’t detect any sign from any of the companies operating in and around the North Sea . . . that they are keen to scale back. What’s particularly encouraging is there’s a lot of new companies in the last couple of years, they’ve come in and taken over assets from other companies, put in a lot of capital investment.”

UK energy minister Malcolm Wicks is due to visit Shetland for the first time later this year, possibly in November. The taskforce’s long-awaited decision on west of Shetland discoveries has been delayed twice and SIC convener Sandy Cluness said the difficulty appeared to be the number of oil and gas finds which were at different stages of exploration.

“To get something now that would suit the purposes of all or most is quite difficult,” Mr Cluness said. “Total are the only ones ready to go and they, as we understand it, would be happy to take their pipeline to Sullom Voe. If one took that step it might be difficult for others not to but this taskforce has not come up with a final decision.

“They’ve put the decision back and back; I think it’s quite a complex decision they have to take, basically because of the number of different companies involved. One development there might well lead to others. We’re led to believe the government’s preferred solution is a big offshore hub, but we’ll keep on trying and hoping they’ll realise the benefits [of Sullom Voe].”

After visiting the Burradale windfarm on Tuesday afternoon, Mr Cairns told The Shetland Times it was clear that there is a huge scope for renewable energy in Shetland and that the government was keen to encourage the development of renewables as part of the UK’s energy mix. Although the proposed Viking Energy windfarm is a matter for the council and the Scottish government, he said the UK government “would encourage these sorts of developments”. He said: “You have here in Shetland one of the most productive single turbines anywhere in the world, producing electricity over 50 per cent of the time. That is phenomenal – the average is 20 per cent – but even at that, you’re still 50 per cent of the time not producing.

“You need a base load . . . you’re going to need clean coal, gas, import more gas, and we believe also that nuclear will be part of that mix.”

It has been suggested that an interconnector cable could be laid to Norway to allow the grid shortfall when turbines are unable to generate electricity in Shetland to be met by hydropower from the Scandinavian country but Mr Cairns said he thought the “logical and natural” solution would be a connection with the UK mainland.

“I was in Norway last week and I have to say I didn’t detect an enormous amount of enthusiasm from the Norwegians,” he said. “They are overwhelmingly exporters [of electricity]. It’s very difficult to see why the Norwegians would find this particularly attractive, when you think of the capital outlay.”

With Gordon Brown’s government under increasing pressure to take action to help hard-pressed families during the steep economic downturn of recent months, Mr Cairns gave little indication of what Labour is planning to do to help the poorest in society deal with spiralling energy prices which have seen electricity and gas bills rising by as much as 20-30 per cent.

The announcement of a package of measures – which includes getting energy companies to help offset rising fuel bills – was postponed earlier this week.

Mr Cairns said “significant progress” had been made in the first eight years of the Labour government on fuel poverty but admitted that progress has stalled in the past 12 months as oil prices reached “eye-wateringly high” levels. He hopes to see electricity and gas bills moderate as the price of oil stabilises but said one way householders could make savings would be to change their supplier.

“A lot of research has shown that in Scotland there is a greater reluctance for people to shop around and transfer from one company to another,” Mr Cairns said.

“I realise Shetland may be an example of somewhere that is limited in terms of the choice people have, but the point remains. It is relatively straightforward to change supplier, a lot of people could find that they could reduce their bills and that’s something we would encourage people to do.”

Meanwhile, Mr Scott has repeatedly called for an investigation by the competition authorities into the fact that Shetlanders are paying on average 14p a litre more in petrol and diesel prices than those on the UK mainland, but Mr Cairns said there were discrepancies throughout Scotland and added that Chancellor Alistair Darling had – for the second time – moved to postpone a planned 2p increase in fuel duty.

The 42-year-old MP for Inverclyde noted that there were differences in pump prices between, for instance, Greenock and other areas around Glasgow. He said that big companies with lots of different outlets, in particular supermarkets, had differential pricing regimes and he was concerned about a lack of transparency, adding that if anybody has evidence of racketeering they should bring it forward to the Office of Fair Trading or the Competition Commission.

“We are not deaf to the issue,” he said. “Right across the board there is a discrepancy in terms of what is being charged. At the same time you have to balance that with levels of income, overall poverty – you’ve got rurality where people need their car, other places where people just haven’t got the money.”

Mr Scott branded those comments as “pathetic” and pointed out that there was roughly a £1 per gallon difference in fuel prices between Aberdeen and Lerwick, of which he understands the government takes 70 per cent in tax.

“Whatever the reason for that, the government would need to explain why they take that for the cost of getting petrol,” Mr Scott said. “It shows an arrogant disregard for the shocking difference that islanders are facing. The other side of that I feel very strongly about is that it ignores the reality of fuel poverty – it’s also about keeping the house warm.”

Mr Scott is backing a windfall tax on energy companies’ profits to help households to cope with spiralling electricity and gas bills, following the latest price hikes from Npower and Scottish Power.

He said: “Labour is letting down people the length and breadth of our country as energy prices soar. What is the point of the Labour government at the moment? Does Labour not realise how people are hurting and why are they not taking action to protect those families and individuals already struggling with massive hikes in the cost of heating their home?”

But Mr Cairns said that while there was an argument for a windfall tax, that had to be balanced against the already high level of tax levied against energy and oil companies. He added that those companies like stable, transparent and predictable taxation regimes and that there were “an awful lot” of jobs dependent on the health of the industry.

“If we want companies like BP to make long-term investment plans at Sullom Voe . . . if we want them to have that long-term future we have to be very careful how we tax it,” Mr Cairns said. “We need to be very careful about not sending out a signal at a time when they are making massive oil finds in Russia and Nigeria, off the west coast of Australia, Mexico, that the UK is still open for business when it comes to oil and gas exploration.”

The Labour party’s ongoing leadership contest in Scotland has been widely derided by the national media as a lacklustre battle between a trio of uninspiring candidates, but Mr Cairns said he felt there had been a very good debate centred upon policy by the three “excellent” candidates – Iain Gray, Cathy Jamieson and Andy Kerr. He said they had not spent their time attacking each other, which he claimed was the reason the contest had not generated a lot of coverage.

Mr Cairns added that during his discussions with Shetlanders on his visit it was clear to him that there was little appetite for breaking up with the UK and that he was looking forward to Labour’s new leader exposing First Minister Alex Salmond for the “shocking levels of broken promises” on a raft of issues, including increasing the number of police officers and providing help for first-time house buyers.