WOOD Group has won an extension of a contract to operate a giant floating production vessel in the UK North Sea, which could be worth £56 million.
The Aberdeen-based oil services giant has been appointed by Teekay to manage operations on the Hummingbird Spirit floating production, storage and offloading (FPSO) vessel, for nine months to December 31.
The Canadian shipping giant has also taken an option to extend the contract to March 2015. As the contract is worth £28m annually, Wood Group will earn an extra £56m if Teekay exercises the option.
The extension will allow Wood to retain 100 jobs related to the FPSO, used to produce oil from Centrica's Chestnut field in the Central North Sea.
The value of the contract reflects the strong demand for production services at a time when oil and gas firms are ramping up investment in the waters off the UK.
In February Oil & Gas UK reported that in 2012 investment in developing new fields and extending existing assets hit a 30-year high of £11.4 billion and could exceed £13bn this year.
The extension to the Hummingbird Spirit deal was announced the day Korean-owned Dana Petroleum said contractors had laid the keel of a $400m (£265m) FPSO it will use to produce oil from a new $1.6bn development east of Shetland.
Earlier this month Wood Group said its success in UK waters had helped put the company on track to achieve results in line with expectations this year.
The extension of the Teekay contract is a coup for Wood Group, which has been running operations on the FPSO since production started from Chestnut in 2008.
The original contract was the first Wood Group won as a Duty Holder for a North Sea production facility, under which it assumed full responsibility for managing Hummingbird's operations.
Dave Stewart, UK managing director of the Wood Group PSN arm said: "WGPSN is one of the few service companies in the UK to be contracted to duty holder responsibilities and we're delighted to receive this extension."
Dana Petroleum's chief executive Marcus Richards said the laying of the keel of the FPSO that will produce the 'Western Isles' fields was a major milestone for the company and the project.
He added: "We aim to significantly grow our production over the next five years and this project is vital to helping us achieve that goal."
The Western Isles project involves developing the Harris and Barra fields in the Northern North Sea, 100 miles east of the Shetlands.
Dana sanctioned the investment required last year.
The decision reflected the continued enthusiasm for the North Sea of Dana's owner, Korea National Oil Corporation. KNOC established a big presence in the area through the £1.9bn hostile takeover of Dana in 2010.
Dana expects production from the Western Isles fields to start in 2015 and to plateau at around 30,000 barrels oil equivalent daily.
The FPSO is being constructed in Shanghai by the Chinese shipbuilder Cosco.
Dana said the new FPSO will be capable of storing 400,000 barrels oil.
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