BP vowed to maintain current levels of production in the North Sea until 2030 as the Government yesterday approved the group's £4.5bn plan to extend its key Clair oil field.
The Clair Ridge extension, based about 75km west of the Shetland Islands, is the biggest of four new projects for BP in the UK North Sea, which will represent a record level of annual investment by the company in the region over the next five years. As the lead operator in the four projects, BP will pay about 40 per cent of their £10bn combined cost.
Bob Dudley, BP's chief executive, said: "Although it began over 40 years ago, the story of the North Sea oil industry has a long way yet to run."
Mr Dudley said that total hydrocarbon production across the UK had halved in the last decade and now satisfies about 90 per cent of the country's oil demand and half its gas consumption.
However, he believes that the North Sea still represents a huge opportunity for the company, which the rising oil price has made increasingly attractive to extract.
BP has already produced about 5 billion barrels of oil and gas equivalent from the North Sea and has the potential to produce another 3 billion, he said. This would see the company maintaining its reduced level of production in the region at its current level of between 200,000 and 250,000 barrels a day until 2030. BP would like to continue producing oil in the North Sea until about 2050, albeit it in diminishing quantitites.
BP said that about half of the £10bn investment in the four North Sea projects would be spent in the UK, generating about 3,000 jobs in the country.
David Cameron welcomed the decision to approve the Clair oil field, which BP is operating with Shell, ConocoPhillips and Chevron. "It shows the confidence that there is to invest in the North Sea," he said.
The Clair Ridge extension is scheduled to begin its 40-year production run in 2016. It marks the second phase of development at the giant Clair field, which recent appraisals have confirmed to be Britain's "largest hydrocarbon resource". BP estimates that Clair contained 7 billion barrels of oil and gas when production began in 2005, although it will only be commercially viable to extract a portion of that.
BP is keen to boost its production in the wake of the Gulf of the Mexico oil spill and its unsuccessful attempt to forge an alliance with Russia's Rosneft that would have allowed it to explore for oil in the Arctic. Although it is not "game-changing", analysts back BP's decision to develop its North Sea operation.
Jason Gammel, an analyst at Macquarie, said: "This will be an important asset that will be a steady earner. The economics have improved with the rising oil price." The kind of heavy oil produced in the Clair field is typically cheaper than other grades of oil because of the extra costs associated with refining, Mr Gammel said.
The Clair field, which lies under about 140m of water, is separate from the North Uist, a deep-sea discovery 1,300m below sea level, which BP's contingency plans revealed has the potential to unleash the biggest oil spill in history.