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UK Government Consent for West of Shetland Gas Development

The UK Government today gave consent for Total and Dong Energy to develop the Laggan and Tormore gas fields, which lie in 600 metres of water and in one of the most hostile environments in the UK.

These will be the first gas fields to be developed in UK waters at this depth and will produce more than 1 trillion cubic feet of gas in the course of the field's life.

The Industry and Government Taskforce to examine the potential for new infrastructure in the area and the Government's recent tax change to support the development of remote, deep water gas fields have been significant factors in bringing this project forward.

Business Secretary Lord Mandelson, visiting Aberdeen today, said:

"The announcement today that this £2.5 billion investment is going ahead is a major win for the Shetlands, for Scotland and for the UK.

"The new investment will involve a new gas processing terminal which will create up to 500 jobs in the Shetland during construction and the project overall will support about 2,100 UK jobs during its lifetime.

"It will be a major technical challenge developing the deepest gas fields to date on the UK continental shelf, Laggan and Tormore. I congratulate everyone involved for their hard work and for bringing on stream this very ambitious and worthwhile project.

"The recent initiative by the Treasury in extending Field Allowance to such fields has been particularly important. I wish Total every success."

Energy Minister Lord Hunt said:

"This is a huge step forward for the wider development of the West of Shetland area which still contains about a fifth of the UK's oil and gas reserves.

"As we make the transition to a low carbon future, we must ensure we have secure energy supplies by making the best use of our indigenous energy through projects like Laggan and Tormore."

Secretary of State for Scotland Jim Murphy said:

"This news is a major boost for one of Scotland and the UK's most vital industries. Our North Sea workforce is one of the most accomplished and respected in the world and the hostile environment they will face in the deep waters West of Shetland should remind us of the dedicated contribution they make to our economy and energy security."

1. In January the Government announced an incentive to extend the "field allowance" which was announced in Budget 2009, and introduced in Schedule 44 to Finance Act 2009, to remote deep water gas fields, such as are found in the West of Shetland area.

2. The field allowance works by exempting an amount of production income from the supplementary charge. All profits generated by the qualifying field would still be subject to ring fence corporation tax (currently 30%).

3. The allowance could provide up to £160 million worth of tax relief for each gas field in the West of Shetland region that qualifies for the support.

4. Assuming the project proceeds on schedule, the first production of gas from Laggan and Tormore is expected in 2014.

Source: Dept of Energy and Climate Change
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Posted 19/03/2010

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