The Lerwick location was selected following a UK-wide feasibility study, conducted by Ernst and Young, has as the optimal and most cost effective location for decommissioning work.

The announcement has been made as key figures from oil and gas operators, service companies and other key stakeholders gather on Shetland for an Oil & Gas Authority roundtable event to understand the challenges and opportunities ahead.

One of the Scottish Government’s key Programme for Government commitments, an ultra-deep water port in Scotland could open access to new market areas, as a hub for other locations, and provide business models for a collaborative Scottish supply chain.

Speaking as he met with key leaders from across the oil & gas industry during a visit to Shetland, energy minister Paul Wheelhouse said: “This year’s Programme for Government reaffirms the Scottish Government’s commitment to establishing an ultra-deep water port in Scotland. Following an extensive feasibility study, which explored a number of UK-wide options, including a number of Scottish sites, Dales Voe was identified as the optimal location with potential for a deep water facility.

“I believe investment in a deep water port will unlock the potential for Scotland to secure the largest decommissioning contracts that require the largest heavy lift vessels currently in operation in the North Sea. A deep water port in Scotland will bring significant benefits not only for a single location, but as a key part of an integrated and networked Scotland wide decommissioning offering, with wider opportunities realised through the supply chain.

“We will continue to engage with industry to measure expected demand and to ensure that investment in a deep water facility will bring the widest possible economic benefit and most substantive boost to the decommissioning supply chain in Scotland.”

Gunther Newcombe, director of operations at the Oil and Gas Authority, said: “The OGA is working with operators to develop area plans, to the east and west of Shetland, to maximise value, and welcomes all parties contributing to build a regional vision which will maximize the value of current developments and stimulate future opportunities. Shetland could play an important role in this vision as well as becoming a decommissioning centre of expertise.”

Sandra Laurenson, chief executive of Lerwick Port Authority, said: “Official identification of Dales Voe in a nation-wide feasibility study as the optimal location for the UK’s ultra deep-water decommissioning facility is a welcome endorsement of our belief that this is an excellent future opportunity for Shetland.

“Such a development would benefit the country, greatly strengthening capabilities in a highly-competitive international market. We look forward to working with the Scottish Government, including Highlands and Islands Enterprise, industry and others on the next steps necessary for such a significant investment to be realised.”