SCOTTISH Hydroelectric owner SSE is taking advantage of the North Sea downturn to secure future supplies of gas with a near £1 billion investment in a flagship development West of Shetland.

The Perth-based energy giant has agreed to acquire a 20 per cent stake in the Greater Laggan development around 75 miles off Shetland from Total, in what it described as a timely move amid a period of low gas prices.

SSE will pay £565m to acquire the interest in the development from Total. The French major put the stake up for sale in March as it looked to reduce its exposure to the North Sea following the oil price slump.

SSE has agreed to invest a further £350 million over the next three years towards the costs of bringing the four fields covered by the deal onstream.

The acquisition is an important strategic move by SSE, which has been keen for some time to expand its portfolio of North Sea assets.

With a series of oil and gas companies looking to offload North Sea fields in response to the fall in the crude price since June last year, sector-watchers say the downturn has created opportunities to buy into fields at attractive prices.

SSE’s chief executive Alistair Phillips-Davies said: “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.”

He added: “The acquisition ... comes following a period of relatively low wholesale gas prices and is therefore timely.”

SSE’s decision to buy into Laggan Tormore provides an important vote of confidence in the long term commercial potential of one of the biggest developments seen in UK waters in recent years.

Subject to regulatory approval, the acquisition reflects SSE’s belief in the importance of being able to generate energy from a variety of sources to avoid becoming over-dependent on one kind.

Mr Phillips-Davies said it was appropriate to increase gas production following a period in which the company has invested heavily in renewables.

He said: “These modern assets will help us to meet the gas requirements of our customers and our gas-fired power stations right through to 2030, and possibly beyond.”

The comment highlights the fact that SSE is buying into a development that is expected to be able to produce at relatively low cost by taking advantage of modern production techniques.

SSE’s rival Centrica has been working hard to cut the cost of existing fields, including assets it acquired through the £1.3bn takeover of Aberdeen-based Venture Production in 2009.

With a total development budget of £3.5bn, Laggan Tormore has been a big focus of attention at Total, which will retain a 60 per cent interest in the development.

Denmark’s Dong has 20 per cent.

Expected onstream this year, Laggan Tormore will be linked by a subsea pipeline to a new processing plant which is being built on Shetland.

The gas will be transported to the St Fergus terminal in Aberdeenshire.

SSE is acquiring 20 per stakes in the Shetland processing plant and in the Edradour and Glenlivet fields, which will also be linked to it.

Production from Laggan Tormore is expected to run at five million therms daily from 2016 to 2020, of which SSE will get one million. Output will then decline without further development.

SSE produced an average of around 1.1m therms daily in the latest financial year from interests in a basket of North Sea assets including the Sean field off eastern England.

Arnaud Breuillac, President, Exploration and Production at Total said the deal would allow the company to capitalise on the development while retaining majority ownership.

He said: “With the upcoming start-up of Laggan, followed by Tormore, Edradour and Glenlivet in the coming years, Total is opening up a new frontier area for gas production in the United Kingdom.”

SSE said the acquisition will be financed by a future bond issue and proceeds from its ongoing programme of disposals.