Today’s agreement with Total E&P UK to acquire a 20% interest in four gas fields and surrounding exploration acreage north west of Shetland, and a 20% interest in the new Shetland Gas Plant, is a natural next step forward for SSE for three key reasons.
First, the addition of these assets will help support SSE’s strategic goal of maintaining a balanced range of energy businesses. This goal is designed to ensure that SSE does not become over-exposed to any one part of the energy sector but can pursue opportunities in each of them where appropriate. In line with that, this acquisition, once finalised, will complete our portfolio of gas production assets for the foreseeable future.
Second, the acquisition means we will be able to introduce further diversity across our investment programme. In the years leading up to 2012, renewable energy comprised the biggest part of our capital and investment spending. Since then, regulated electricity networks have claimed the biggest share. While that won’t change as a result of acquiring new gas production assets, the overall programme – under which we still expect to invest around £5.5bn net across the four years to 2018 – will now be more varied and give us a wider range of options when it comes to selecting the right priorities for investment.
Third, these modern assets will help us to meet the gas requirements of our customers and our gas-fired power stations right through to 2030, and possibly beyond. The production assets represent an investment of at least 15 years’ duration that should result in our gas production output being higher than the 400 million therms we saw in 2014/15 for the next five years and remaining above the 200 million therms for a few years after that.
Being located north-west of Shetland, and with the gas from the fields being directly transported to the St Fergus Gas Terminal in Aberdeenshire, the assets are close to our markets in Great Britain and Ireland. The new Shetland Gas Plant, which will process and export produced gas and condensate for onward delivery to the UK mainland, is one of the most important pieces of new infrastructure in the UK and is expected to operate well into the 2030s.
In summary, the agreement to acquire these gas production assets will help us to maintain the overall balance of the SSE group, support greater diversity in capital expenditure, and – crucially - contribute to meeting the gas requirements of customers and power stations for the next 15 years or more. That’s why we believe the acquisition represents a natural next step for SSE.