LONDON, March 28 (Reuters) - British Oil major BP is to proceed with a $500 million-plus investment plan in the remote Shetland Islands, another shot in the arm for North Sea oil.
Though North Sea production has fallen by about two thirds since 2000 and a surprise tax increase in 2011 led to dire predictions about the region’s future, industry body Oil & Gas UK in February forecast a pick-up in production from 2014, fuelled by a surge in investment.
The new investment by BP could bring a huge add-on project at its Clair field and will be welcomed by a British government eager to slow the decline in North Sea production after dramatic falls in the past two years undermined attempts to kickstart growth.
BP said on Thursday that it will drill at least five appraisal wells in the giant Clair field off the west coast of the Shetland Islands, north of Scotland, to discover whether it is worth further development.
BP and its Clair partners, fellow oil majors Shell, ConocoPhillips and Chevron, in 2011 said they were investing 4.5 billion pounds ($6.8 billion) in a second phase of development for the field, which first started pumping oil in 2005.
“If successful, the appraisal programme could pave the way for a third phase of development at Clair - this is now a real possibility,” BP’s North Sea regional president Trevor Garlick said in a statement.
Big oil companies have looked beyond the North Sea in recent years, favouring new oil provinces with more potential, but the rich geology of the areas around the Shetland Islands have kept them hooked.
BP’s plan for Clair follows other recent new investments in the North Sea, including a $7 billion project announced by Norway’s Statoil in December and a 1.6 billion pound ($2.4 billion) investment by Canada’s Talisman Energy two months earlier.
BP, which has the biggest stake in Clair at nearly 29 percent, said that it has already started drilling the first appraisal well and it could complete up to 12 wells over two years, depending on the results of the first wells.