by Hans J. Marter

12th February 2004

TEN people are to lose their jobs at a Shetland-based processing plant for drill cuttings, due to a slump of activities in the North Sea.

Shetland Oiltools Ltd, in Lerwick, yesterday announced they had shut down a second processing plant due to the lack of work, just as the first was being dismantled for sale and shipping abroad.

The proceeds of the sale cannot be used to pay back some of the £11 million of public funds that were lost when Shetland Oiltools' predecessor collapsed.

Only one year ago 19 people were made redundant, when the newer of the company’s two plants was mothballed due to lack of business.

The latest news is testimony to the lack of realism when Shetland became involved in developing an environmentally friendly service sector for the oil industry at Lerwick's Greenhead Base.

Shetland Oiltools Ltd separates drill cuttings into oil, water and a white powdery residue which has to be put into landfill.

There are hopes that work will pick up later in the year so that some of the newly laid off workers can be given their jobs back. At the moment only five people’s jobs are secure.

Shetland Oiltools is a joint venture between Oiltools International and Shetland Leasing and Property Ltd (SLAP), the trading arm of the council's charitable trust.

The company was formed in 2002 following the controversial collapse of a previous joint venture between Shetland Offshore Environmental Services (SOES) and SLAP in which £11 million of public funds was written off.

Although Shetland Oiltools with its plants in Lerwick and Peterhead has a 70 per cent share in the North Sea market, the joint venture had problems from day one because the projected market size never materialized.

A source close to the company said that the market was only one third of what was originally anticipated.

Shetland Oiltools is now in negotiations with four bidders, believed to be from companies in countries from Africa, the Middle East and the former Soviet Union.

Company director, councillor Bill Manson, said yesterday (Wednesday) the proceeds of the sale would be revenue for the company.

Mr Manson, who is also the chairman of SLAP and the Shetland Charitable Trust, said the decision to put one plant up for sale was a method for the company to "rationalise its assets" so that "eventually SLAP will get some dividend" from Shetland Oiltools.

He said servicing the mothballed plant would have put a constant drain on the company's resources and it was therefore "much better to dispose of the plant".

He added: "It does mean that the market for processing drill cuttings isn't as big as a few years ago, but it doesn't mean that the role of Lerwick as a service provider to the oil industry is a dead duck in any respect."

He said the decision to move into the drill cutting processing business was done on sound research five to six years ago, however circumstances had changed.

There was now less drilling in the North Sea and the oil industry had developed a technology which enabled them to inject drill cuttings back into the well rather than to bring it ashore.

Also, the UK government had gone very quiet on proposals which would have forced oil companies to dredge up drill cuttings already accumulated on the seabed.