Gas plant to start producing this year

Petrofac has said it expects to produce its first gas from the Shetland Gas Plant in the third quarter of this year in an upbeat trading statement that gave shares in the oil giant a slight boost.

According to the statement construction work at Sullom Voe is 99 per cent complete and completion and pre-commissioning work is underway. The delays in completing the plant are now slated to cost Petrofac an extra £30 million in “additional completion and pre-commissioning works” on top of about $425m in extra costs recorded by the company over the past year.

Petrofac’s engineering and operations divisions has taken $4.7bn in orders so far this year, adding to a group backlog that stood at record levels of US$20.5bn at the end of May, painting a rosy future.

Petrofac’s Group Chief Executive Ayman Asfari said that, aside from the challenges of Laggan Tormore, the picture was positive. “The group’s backlog stands at record levels, giving us excellent revenue visibility for the rest of this year and beyond.Our pipeline of bidding opportunities remains attractive, and ongoing investment by our clients in large strategic projects in our core markets, together with our strong competitive position, should see us secure a number of further awards over the second half of the year.”

The report adds that construction on the Laggan-Tormore gas plant is “substantially complete”, with planned welding more than 99 per cent complete and more than 99 per cent of electrical, instrumentation and telecommunications (EIT) cabling laid.

It adds: “However, direct construction man hours are higher than previously expected due to additional completion and pre-commissioning-related activities. The costs of the additional direct construction man hours, along with the associated indirect, subcontractor and material costs, are expected to result in incremental costs to complete of approximately £30 million.”

Petrofac’s management has blamed the weather and industrial unrest for the delays at Laggan-Tormore, but it appears the project was overoptimistic from the start, with production originally having been scheduled for the first half of last year.