End of an era as EnQuest takes over from BP at Sullom Voe

A changing of the guard at Sullom Voe has taken place, with EnQuest officially taking over the terminal – ending BP’s long-standing association with the site.

And as the new signs were being put above the doors, staff from the new organisation were on hand to stress it was open for business.

News of the deal first emerged in January, but EnQuest has now officially completed its acquisition.

The deal sees the company take a quarter share of the Magnus oil field, where there is believed to be “significant remaining potential”.

EnQuest is also upping its stake in the terminal and is now positioning itself as being among the largest UK oil producers in the northern North Sea, where it has operated since its inception in 2010.

The company specialises in making the most of mature assets, and says it plans to drill three wells throughout the course of next year.

Daily production rates at Sullom Voe are currently around 70,000 to 80,000 barrels of oil, with a peak of 110,000 barrels for this year.

That is well down on what was once recorded at Sullom Voe. EnQuest wants to capitalise on its opportunities – although it admits the peak figures, obtained during the oil boom years, are unlikely to be recorded again.

Apart from the three wells on Magnus, the company is also carrying out activities on other North Sea platforms. It plans to be drilling again in the Heather field during next year.

The new managers hope to keep the terminal operating beyond 2030. That is significant given that, earlier in Sullom Voe’s history, the site was not expected to last beyond 2000.

EnQuest points to a track record in improving productivity and cost efficiency.

It says it is the biggest single shipper at Sullom Voe, with around a third of its North Sea production flowing through the terminal.

EnQuest’s chief operating officer, Neil McCulloch, spoke to the media after flying out by helicopter to Magnus.

He said he was “pleased and proud” that the efforts carried out by many people had come to fruition.

“I am very pleased to welcome approximately 300 new people on Magnus, and also in Aberdeen. I have been able to witness people taking off BP boiler suits and putting on EnQuest ones for the first time.”

He added the assets were a “strong, strategic fit” for EnQuest, a company which he hoped was a good supporter of BP and the work it had done in and around the isles over the life of Sullom Voe.

Mr McCulloch said a three well drilling programme would begin in the first quarter of 2018.

“That will be great to see additional barrels coming in over Magnus through the Ninian pipeline system and into the terminal.”

He said Magnus had produced around 16,000 barrels of oil in 2016, and the company hopes to add around a quarter to that thanks to the first couple of wells it is drilling.

“Once we understand a bit more around the geology, there are more drilling interventions as well.”

“It feels very good to be here today, and very exciting.”

The announcement in January that EnQuest would be putting its name above the door prompted robust talks from union leaders about the need to protect jobs.

Much was made of the TUPE regulations which should protect jobs of those transferring from BP to EnQuest, for a time at least.

General manager Derek Liversidge said that would last throughout 2018.

“I think the first thing that we do is work together as a leadership team on site to try and see what the future looks like for us, he said.

“I think it will be great to secure new barrels, or new barrels being added, as a consequence of confidence in the timeline being associated with the terminal.

“We are looking at a greatly extended timeline of people being here, to bring barrels here. The West of Shetland story is very clear in the longevity it has. East of Shetland needs care and attention to keep investment going into the East Shetland Basin, and that is what’s key for us.”

Mr McCulloch said EnQuest had been “greatly encouraged” by the enthusiasm of “teams” transferring from BP to EnQuest.

“We look forward to working with them to extend the lives of Magnus and SVT.”

Contact was made in January between EnQuest, BP and elected members from Shetland Islands Council. Mr Liversidge said it was important that those ties were maintained.

In a statement, Mr McCulloch said: “The transaction is very much in the spirit of MER UK (Maximising Economy Recovery), ensuring that the ‘right assets’ are in the ‘right hands’.

“EnQuest, as operator, brings proven expertise in increasing production on mature assets through drilling and well work. This transaction signals a new chapter in the life of Magnus.”

Chairman of the council’s development committee, Alastair Cooper said he hoped EnQuest would play an active part in seeking new opportunities for the terminal.

“I think BP has been good for Shetland and good for Sullom Voe. But we are at a stage with declining throughput where we need fresh thinking as to how to keep Sullom Voe productive and also create a unit cost that encourages other folk to come and use the facilities.

“BP has taken it as far as they could go – thanks very much for what they have done, but I am looking forward to EnQuest coming in and being more aggressive in seeking new business.”