Total has delayed indefinitely its conceptual plans to develop the estimated 100 MMbbl oil rim of its deepwater Laggan-Tormore field west of Shetland.

DI understands that the French operator, which like many other majors is substantially cutting its spending plans, has opted instead to simply optimise its forecast near-term returns from the field – which is already nearly a year behind its original schedule in terms of being brought onstream – and drill an extra production well later this year to increase the gas-condensate field’s eventual output of circa 90,000 boe/d. Laggan-Tormore holds an estimated 4 Bboe of mainly gas-condensate res­erves.

Although this move is not the death knell for the oil rim project, it does appear that any plan Total and its minority partner DONG Energy have to develop it has been moved to the backburner until overall industry economics improve enough to make the economics of an oil rim development stand up commercially. However, with the gas-condensate reservoir’s pressure to now be depleted more rapidly than at first envisaged, the oil rim’s overall reserves recovery potential could be substantially and negatively impacted.

The oil rim had been something of a pleasant surprise for the field partners when it was first made in 2013, with crude being unexpectedly struck downdip of the field’s main gas reservoir while drilling a Tormore production well.

The field itself lies in 600 m (1,969 ft) of water in the UK sector approximately 140 km northwest of the Shetland Islands and was originally due onstream before the end of 2014. However ongoing schedule delays mean that first production is only expected during the third quarter of this year, Total revealed in its latest results presentation.

Laggan-Tormore is a significant new frontier hub for Total and DONG (80% and 20% stakes respectively) – who are investing an estimated US $5.5 billion on the project – in an area (Blocks 206/2 and 205/5a) where previously there was no infrastructure. It appears likely now that Total will be mostly focused on the future tie-in of smaller stranded gas-condensate discoveries in the surrounding vicinity, with finds such as its Glenlivet field in Block 214/30a lined up in 2018 as an eventual contributor via the nearby Edradour (Block 206/4) discovery (see DI, 24 November 2014, page 7).

Gas from Laggan-Tormore will flow via a 30-inch dia­meter pipeline to a new 500 MMcf/d central gas processing plant on the Shetlands, before onward transportation into established gas pipeline infrastructure.

Total took its original Final Investment Decision on Laggan-Tormore back in 2009, with the $5.5 billion capital investment figure being spent on the first phase alone.

Although both companies have been genuinely committed to developing the oil rim, with a FEED (Front End Engineering and Design) study undertaken, it now looks to have become the victim of marginal economics and the overall industry squeeze on spending.

Concepts on the drawing board for the oil rim had included a tieback to a new relatively small standalone offshore facility or buoy, as well as a long-distance tieback direct to shore or to Chevron’s planned but currently stalled Rosebank FPSO some 50 km away. BP’s Clair complex was also a further option.

Total confirmed last week that it is aiming to cut its exploration budget by 30% this year to $1.9 billion, and cut organic Capex by more than 10% to less than $24 billion. It will also increase previously planned cuts to operating costs by 50%, and accelerate plans to sell off various assets between 2014 and 2017 (including up to $5 billion-worth this year alone). The company’s 2014 accounts confirm net earnings of $12.8 billion, some 10% down on the previous year.

CEO Patrick Pouyanne said revealingly in the company’s results presentation last week that “…all of the group’s segments are expanding their cost-cutting programmes to get through this period, with no compromise on the absolute priority to safety… …the group is focused for the short-term on generating cash flow and reducing its breakeven point, and for the medium term confirms its growth strategy”.

Offshore