Britain’s oil and gas sector has received a boost following government approval for a $1.6bn project led by Dana Petroleum, the North Sea explorer that was acquired for £1.87bn by Korea National Oil Corporation at the end of 2010.
The Department of Energy and Climate Change has approved Dana Petroleum’s Western Isles project that will exploit the Harris and Barra oilfields in the northern North Sea.
The project is a joint venture between Dana, with an equity share of 77 per cent, and Japanese oil company Cieco, which holds the remaining 23 per cent.
The Harris and Barra fields are estimated to contain recoverable oil reserves of more than 45m barrels.
The nine-well development is predicted to produce more than 40,000 barrels of oil equivalent and will add more than 30,000 barrels net to Dana’s daily production when it begins to operate in 2015.
The commitment by Dana, which also has operations in Egypt, Norway, the Netherlands and Africa, is part of a $5bn investment programme aimed at doubling the size of the company over the next five years.
Marcus Richards, Dana’s group chief executive, said: “The Western Isles project is at the heart of our growth strategy. Unlocking the potential of these new fields is a significant milestone as we aim to double our production to 100,000 barrels a day by 2016.”
The go-ahead for the project is one of nine field approvals granted by DECC this year - one of 25 offshore project approvals in total - and follows the introduction of a number of tax breaks for companies designed to stimulate investment in UK waters.
A £2bn tax raid on UK oil and gas operators made in last year’s Budget had provoked fears it might deter multibillion pounds investments required to help stem the decline in Britain’s oil and gas output.
In October DECC announced its approval for a £1.6bn project by Talisman of Canada aimed at extending the life of Montrose, Arbroath, Brechin, Arkwright, Carnoustie and Wood fields.
The ministry said the Talisman project would lead to the production of a further 100m barrels and create or sustain 2,000 jobs in the UK.
Operators Valiant, EnQuest, Premier and Taqa are among others to have also recently received DECC approval for North Sea field developments.
John Hayes, UK minister of state for energy and climate change, said Dana’s latest project would “bring new jobs and create new opportunities for UK companies to compete for key parts of the work”.
Sajid Javid, economic secretary to the Treasury, said the project provided further endorsement of the government’s strategy of modifying tax policies to stimulate investment.
The Western Isles project involves development of at least five production and four water injection wells along with two exploration wells tied back to a floating production, storage and offloading vessel (FPSO) with oil transported away using shuttle tankers. Drilling is expected to begin 2013 with subsea installation put in place in summer 2014 and the FPSO put in place by 2015.