UK Edradour gas output halts amid decline at Shetland hub

TotalEnergies has suspended production at Edradour, one of four gas fields in the Greater Laggan area west of the Shetland Islands, partner company Kistos said, as the UK gas hub shows signs of significant decline and higher water production.

The halt at Edrarour was described as temporary by Kistos, a London-listed independent that holds 20% stakes in the Greater Laggan fields.

The hub was brought on stream in 2016 along with a 140 km pipeline to a new 500 MMcf/d gas processing facility on the Shetland Islands. At the time the project was expected to meet 6% of UK gas demand, but plateau production rates fell short of expectations and output in 2022 was nearly two-thirds below the 2018 annual peak, falling to 1.5 Bcm for the year.

Another field in the hub, Tormore, also shows signs of dwindling production, according to official data.

The issue at Edradour is thought to be linked to management of produced water, a source close to the situation told S&P Global Commodity Insights, following a significant increase in water production at all the fields last year.

Kistos, however, underlined hopes for two potential additional projects the partners may make investment decisions on in the coming months: Edradour West and Glendronach.

It comes as the UK government rows back from a punitive upstream windfall tax introduced in 2022 that lifted headline rates to 75%, with the announcement June 9 of a planned price floor, by which the tax will be annulled if prevailing oil and gas prices fall below certain levels.

"Production from the Edradour field has been temporarily suspended due to a technical issue which is expected to be resolved in due course," a Kistos spokesperson told S&P Global Commodity Insights on June 8.

"Within the wider Greater Laggan Area, Kistos and its joint-venture partners continue to progress the Edradour West and Glendronach developments and look forward to updating parties on these later in the year."

The partners are also currently drilling an exploration well in the area known as Benriach, which if successful could help boost production from the hub. Drilling is due to be completed in the third quarter.

Following treatment at the Shetland Gas Plant, Greater Laggan gas is exported to the UK mainland via the Shetland Island Regional Gas Export System (SIRGE), while condensates are exported via the Sullom Voe Terminal, source of the Brent crude stream that remains a mainstay of Platts' Dated Brent benchmark.

The Greater Laggan issues come amid slowing output of the Brent crude blend, sourced from a decreasing number of fields east of the Shetland Islands, after the core Brent field was finally closed by Shell in 2021.

The overall decline in UK gas production in recent years has been less steep than for oil, partly due to the introduction of newer fields such as Culzean and Tolmount. UK statistics suggest improvements in efficiency, with proportionally less gas used in upstream production processes.

Annual gas output fell 5% between 2018 and 2022, reaching 378.5 TWh in 2022, according to official data.

The UK NBP month-ahead gas price was last assessed at 64 p/th on June 8.

TotalEnergies declined to comment.