Go-ahead for first Atlantic oilfield

A new era in Britain's offshore oil industry began yesterday when the Government gave the go-ahead for the development of two oilfields west of the Shetland Islands.

As production in the North Sea reaches a plateau, the Atlantic has become Britain's most promising oil and gas region. Announcing approval for the commercial development of BP's Foinaven field, the first in Atlantic waters, Tim Eggar, the Energy Minister, said the area could contain 30 per cent of Britain's known oil reserves, guaranteeing supplies into the next century.

BP's pounds 550m project to develop Foinaven, 120 miles west of Shetland, is a joint venture with Shell. It will be followed by new production in the Schiehallion field 20 miles to the north. Industry sources say there are 11 potential oilfields in the region, containing reserves of 3.5 billion barrels. Up to pounds 10bn could be spent in the area in the next seven to eight years in a second big phase of offshore oil development.

Mr Eggar said: ``We are talking about very significant development, a world-scale province by any standards. Over the next 20 years or so we will see a level of production west of Shetland which will be not far off being as significant as that in the northern North Sea.''

Production at Foinaven, which is thought to contain up to 500 million barrels of oil, is due to begin early in 1996. It will be the biggest discovery to be developed commercially in Britain's offshore waters for several years.

The first oil from the field was brought ashore less than three months ago and the speed with which the Government has granted the company a development licence shows the importance attached to the Atlantic finds.

Stephen Scullion, oil analyst at the Edinburgh-based energy consultants Wood Mackenzie, said: ``After 25 years of exploration and production, North Sea fields have become `mature'. The industry and ministers know that the future of Britain's offshore oil industry into the next century lies west of Shetland. Today's announcement marks the start of a new era.''

The flurry of activity in the Atlantic has rekindled a long-running dispute between Britain and Denmark over oil and gas extraction rights in the region. Talks between the two countries, which began some 16 years ago, are deadlocked.

Denmark, which represents the government of the Faroe Islands, says the minerals boundary between the UK and the Faroes should run along the existing fisheries border, which was drawn up 20 years ago. British officials argue that since the UK continental shelf extends beyond the fisheries boundary, British companies should have the right to drill in Faroese fishing waters.

With recent discoveries and the prospect of new finds west of the current fishing boundary, the dispute has reached new heights. Last month Denmark threatened to take Britain to the International Court of Justice in The Hague to resolve the issue. Legal action could delay new exploration and production in the region.

Massive investment, page 28

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