Tanker charges to rise by 83 per cent
Rosalind Griffiths
Tanker charges at Sullom Voe terminal will rise by 83 per cent next year, giving rise to the hope that some of the losses incurred this year will be redressed.
This year the council’s ports and harbours took in £3 million less than expected – £5.5 million was forecast, but only just over £2 million is now expected to go into the harbour account at the end of the financial year.
Speaking at a meeting of the council’s harbour board, executive finance manager Jonathan Belford said: “We were not generating as much as we hoped from Sullom Voe because of the reduced number of tankers.” In addition, the low oil price and extended shutdown of the Clair field platform had contributed to this.
He added that projected income from the Shetland Gas Plant would be lower than expected. Instead of operating throughout 2015/16, it was now only expected to start production next month. Given the low oil and gas prices, and as the gas plant would not initially be operating at full capacity, it is only expected to yield £250,000 in the last quarter of 2015/16 and £693,000 in 2016/17.
However, Mr Belford said he was sure the loss this year would be recovered in 2016/17, and it would be a better year for the harbour account, with a net surplus of £7.5 million.
Head of infrastructure Maggie Sandison said that a recent meeting with BP had shown that they understood the need for cost recovery, and vice-chairman Robert Henderson said there was “no problem” with BP, who recognised the council could not support the terminal with state aid.
Harbour board chairwoman Andrea Manson said that she did not think the 83 per cent price increase for tankers would put operators off. She said: “I certainly hope not. They [charges] were not all that expensive to start with.”
Some additional income will be generated by all other harbour charges for all other council pier users being increased by three per cent.
Mark Williamson
Absolute madness no wonder BP is sending its cargo’s to Rotterdam. They should have realised that as production declines you still need the same infrastructure so a little rainy day money should have been set aside to offset the decline. Folk who run the council would never last in the private sector as they would be sacked for being incompetent and statements like “Harbour board chairwoman Andrea Manson said that she did not think the 83 per cent price increase for tankers would put operators off. She said: “I certainly hope not. They [charges] were not all that expensive to start with.” goes to prove they don’t have a clue what they are talking about.
Johan Adamson
I am a bit worried they will use high prices as an excuse not to use SVT. But presumably they have checked this out and know that the charges were too low before.
Robert Duncan
People need to recognise that the Council’s hands are largely tied here. They simply aren’t allowed to run the harbours at a loss, even for one year, and must therefore charge appropriately to cover costs. The only alternative is to sell them off, and everybody would be up in arms about that as well.
Mark Williamson
Robert,
The council should have had the foresight to understand that as traffic reduces in SVT the amount of infrastructure required will still be the same. Money should have been put aside each year to cover the operating costs during the decline. With the oil price as low as it is and due to fall much lower, expected to be as low as $20 per bbl. Operators are looking to cut costs and save money and if a terminal increases its prices at this time it will be effectively pricing itself out of the market and the operators will go elsewhere. Also where is it cast in stone that they cant run at a loss for a year to ensure they keep future business and look to recoup costs when the oil price recovers?
Michael Garriock
“The only alterntive is to sell it off…..”
I really don’t think so.
Given the inefficient practices endemic in pubic bodies, and in the SIC in particular, having them run this opertion was never a good idea from Day 1, and an even worse one now that there are far fewer $$$’s blowing in the wind. In fact it poses the question, just how do the SIC get away with running the Sullom harbour operation?
Weren’t we told that the SIC was not allowed to run Mareel and it had to be farmed out to the Arts Trust, and VE had to be farmed out to the Charitble Trust, both on account of EU regulations prohibiting local authorities operating commercial enterprises. Isn’t the port of Sullom a commercial enterprise too?
Selling right now, when the industry is in a downturn would only realise a poor price, which given current low interest rates would barely earn enough interest to maintain its value against inflation.
Lease it out under contract to private enterprise, Shetland retains its asset and control, gains an income, and loses the headache of the day to day running of it. Everybody wins.
ian tinkler
Jim Sillars’ threat to BP; “when we get a Yes majority, we will use that power for a day of reckoning with BP”. Now an 83% rise in tanker charges at Sullom Voe, no wonder BP is sending its cargo’s to Rotterdam. Heaven help Shetland, between the SNP, Shetlands council’s harbor board and the drop in oil price what chance Sullom Voe ? Time to a radical change perhaps. Those whom care have a good long look at “Wir Shetland”. Shetland’s in control, could hardly do a worse job!!!
http://www.wirshetland.org/
Adam Irvine
A private sector entity has much more scope to run an efficient, lean operation and can hive out jobs left, right and centre in pursuit of the almighty dollar. Were the council to take the same approach with local families livelihoods; it would be utter chaos.
If we assume for a moment the SVT port operation was to be a private entity and in order to cover a reasonable contingency of vessel movement – were required to staff it to a similar level; you can be damned sure shareholders aren’t going to suffer a loss year on year. The only reasonable approach is the increase in charges to at least an expected breakeven point.
I agree with the decision to increase charges to reflect the decrease in traffic. That said, I would also like to see a thorough review of the operation with the objective of cutting costs.
ian tinkler
“to increase charges to reflect the decrease in traffic.” Anyone in business knows that would be a recipe for bankruptcy. Reduce running costs first, then try and increase traffic. If traffic is premanently down, downsize bushiness until prfitable