A cost reduction program has meant Total has now decided to move forward with its West of Shetland Edradour subsea development, the French oil major said today.
Edradour, in Block 206/4a, in about 300m water depth, 75km northwest of the Shetlands, was put on hold in 2013, due to significant cost increases, following a tendering process. Following a cost reduction program, the development will now form part of what will be a "new strategic hub" West of Shetland, said the firm's Northern Europe Senior Vice President.
The offshore oil and gas industry has been facing cost inflation pressures, with a number of projects put on hold as a result. According to a senior vice president at Statoil, subsea project costs doubled in the 10 years 2003-2014. Anders Opedal, speaking at the recent Underwater Technology Conference in Bergen, Norway, said the cost increases were “unsustainable” and that Statoil had set a 20-30% capex reduction target.
Total's Senior Vice President Exploration & Production, Northern Europe, Patrice de Vivies, said today that negotiations with contractors had, since the Edradour project was put on hold, reduced costs on the project to “an acceptable level,” estimated at about £340 million, with first production targeted for Q4 2017.
Edradour will tie-in to Total’s Laggan-Tormore development, whose sanction included the provision of export infrastructure for future West of Shetland projects, such as Edradour.
In addition, Total today said it had acquired a 60% interest in the nearby Glenlivet discovery, operated by DONG Energy. Glenlivet is also expected to be tied back through the Laggan-Tormore infrastructure. Total said the tie backs of Edradour and Glenlivet to Laggan-Tormore are expected to add reserves of more than 65MMboe and will form part of a "new strategic hub in the West of Shetland area."
The Edradour project go-ahead and Glenlivet acquisition come as Total is working on its central North Sea West Franklin Phase II project (adding 40,000 boe/d capacity) and the Laggan-Tormore project (90,000 boe/d capacity). Both projects are scheduled to start up in 2014 and will result in Total becoming the largest oil and gas producer in UK by 2015, said the firm.
“With the upcoming start-up of Laggan-Tormore, the sanction of Edradour, and the entry into Glenlivet, Total is establishing a new strategic hub in the West of Shetland area,” said de Vivies. “The sanction of Edradour also demonstrates our focus on cost discipline. The development was put on hold in 2013 due to significant cost increases following the tendering process, but subsequent negotiations with the contractors have reduced the costs to an acceptable level, allowing us to successfully launch the project.”
The Edradour development plan consists of the conversion of the discovery well into a production well and a 16km production pipeline tied back to the main Laggan-Tormore flowline. Edradour is expected to reach a plateau of 17,000boe/d.
Glenlivet is in Block 214/30a, in about 435m water depth, 90km northwest of the Shetlands. Total and the Glenlivet partners are studying the possibility of developing the reservoir with two wells and a 17km production pipeline tied back to Edradour. A decision by the Glenlivet partners regarding the development of the field is expected shortly, said Total.
Total operates the Edradour discovery, with a 75% interest, together with its partner DONG E&P (UK) (25%). Following Total’s entry into Glenlivet, with a 60% interest, DONG will retain a 20% interest, along with Faroe Petroleum (UK) and First Oil Expro, each holding 10% interest. Total (with 80% interest and operator) and DONG (20%) are also partners in the Laggan-Tormore development.
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