Schiehallion shutdown will cost council £1m in lost revenue

Shetland Islands Council is set to lose well over £1 million this year due to the continuing shutdown of the Schiehallion field west of Shetland.

The harbour board on Wednesday reported a shortfall of £900,000 during the first seven months of the financial year due to the lack of tanker movements at Sullom Voe as a result of Schiehallion not producing oil. Now the problem is set to worsen after it emerged later that day that BP does not expect to get the field back on stream until early 2010.

Schiehallion has essentially been out of production for six months already for extensive repairs. An attempt to resume production last month was short-lived after the shuttle tanker Loch Rannoch bumped the Schiehallion floating platform, damaging the special hose which is used to pump oil into the tanker.

Since then the Loch Rannoch has been lying out of action at jetty three at Sullom Voe and BP is still continuing its investigation into the incident. The company had expected to resume production quickly after repairs but a spokesman admitted it now hoped to have it flowing “early in the new year”.

During normal production, the council’s harbour team at Sullom Voe would expect to handle around eight tankers a month involved in delivering or exporting Schiehallion oil. It is hard for the council to rock the boat with BP regarding its failure to deliver the expected income because the contract to handle Schiehallion oil is up for renewal in 2012 and the oil company might be prompted to take its business elsewhere.

Harbour board chairman Alastair Cooper said the full effect of the lack of Schiehallion trade would start to show through in council accounts next month. He warned of a “quite challenging” financial year ahead when the board seeks its share of council funds when its income has fallen and a planned cut in the Sella Ness workforce to save money has not yet come to pass.

The loss of income to the council’s harbour board from Schiehallion so far this year is compounded by extra overtime payments of £92,000 which it has made to tug crews due to a high level of sickness and the requirement that extra men join a crew when a tug is sent out of harbour limits. On trips south for drydocking, two crewmen have to remain at the yard while work is done and once the tug is lowered back in the water the whole crew has to go south to be with her again.

Asked about cutting the overtime spending, ports and harbours head of operations Roger Moore said that under the terms of the transfer of the workforce from Shetland Towage, the council had to honour the tugmen’s old pay and conditions while the transfer agreement remains in place. However, he hoped the overspend would even out over the course of the whole year.