SSE to pump £565m in Total’s UK gas fields

LONDON-U.K. utility SSE PLC SSEZY, +0.85% said Wednesday it has agreed with French oil and gas major Total SA TOT, +1.61% to buy a 20% stake in four gas fields in the North Sea’s Shetland Islands and a 20% stake in a new Shetland gas plant for GBP565 million ($881 million)in cash.

For the French energy giant the sale means a step forward in its $5 billion asset sale programme this year, while SSE gains access to valuable gas supplies to feed its 8.5 million customer accounts and power plants.

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).

Following completion of the sale, Total will hold a 60 percent operated interest in the Laggan, Tormore, Edradour and Glenlivet fields, alongside partners DONG E&P (UK) Ltd. (20 percent) and SSE E&P Ltd (20 percent).

SSE expects to invest around £250 million in further development by 2018.

The fields are not yet producing gas but are expected to start production this financial year and peak production – at around five million therms of gas per day – is forecast to be achieved next year.

The Big Six company said the agreement comes at a time when production volumes at its existing gas fields are expected to decline.

Chief executive Alistair Phillips-Davies said: “We are focused on maintaining a balanced range of energy businesses, and we have regularly set out our wish to seek new opportunities to increase SSE’s presence in the upstream gas sector where assets can be acquired for a fair price, and that is exactly what this deal represents”.