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SSE backs North Sea with £565mln acquisition

Published: 09:07 29 Jul 2015 BST

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Total sells stake in North Sea gas project to SSE for £565mln

The upstream hydrocarbons division of UK energy utility SSE (LON:SSE) has acquired a 20% stake in a new gas field in the West of Shetland area of the North Sea.

SSE is paying French major Total £565mln (US$876mln) for the stake in the project, called Laggan-Tormore, which comprises five wells and an onshore gas plant on the Shetland Islands.

The operation is due online in the coming months and will ramp up to produce 500mln cubic feet of gas per day.

A lengthy development programme began in 2010, and has seen contractor Petrofac (LON:PFC) rack up over US$400mln of losses.

Total will retain 60% of the project which despite its challenges – including currently low hydrocarbon prices – is still considered one of the region’s key new assets.

Laggan-Tormore is the first of a number of developments in a ‘hub’ which will also include the Edradour and Glenlivet assets (which are also part of the SSE deal).

The project represents Total’s third hub-development and with its completion the French group is set to become the largest oil and gas producer in the UK.

“With the upcoming start-up of Laggan, followed by Tormore, Edradour and Glenlivet in the coming years, Total is opening up a new frontier area for gas production in the United Kingdom,”

Industry experts expect this deal to be among the first of many asset disposals in the region, as larger blue-chip firms look to reduce portfolio’s and more speculative operators position for some form of turn-around for the sector generally, and the North Sea more specifically.

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