£670m to develop biggest North Sea oil discovery in 25 years

The biggest oil discovery in the North Sea for 25 years was announced yesterday when the developers of the Buzzard field said it could contain 1.1 billion barrels of oil.

The biggest oil discovery in the North Sea for 25 years was announced yesterday when the developers of the Buzzard field said it could contain 1.1 billion barrels of oil.

The field, located 100 kilometres (63 miles) north-east of Aberdeen, was initially thought to hold around 800 million barrels. But EnCana, the Canadian operator of Buzzard, has increased its estimate of reserves by 38 per cent following the successful drilling of a further three appraisal wells.

Brian Wilson, the Energy minister, welcomed the announcement and said the $1bn (£670m) development of the field could provide more than 1,000 jobs. "The scale of this discovery sends out a powerful message to other independent, innovative firms about the remaining opportunities in the North Sea," he added.

EnCana has a 45 per cent stake in Buzzard while BG Group has 20 per cent. A further 30 per cent is owned by Intrepid Energy North Sea and the remainder by Edinburgh Oil and Gas. First production is due to begin in late 2005 or early 2006. BG said the estimate for recoverable reserves stood at 400 million barrels with "significant upside potential". That would put it on a par with the Alba field, which was discovered in 1984 and contains 460 million barrels of recoverable reserves, and the Nelson field.

However, it remains tiny compared with the huge discoveries in the North Sea made in the 1970s such as Forties which contained 2.7 billion barrels of recoverable reserves.

Analysts said that Buzzard bucked the trend of small discoveries in the mature North Sea oil sector. The discovery was made in an area previously believed to be mature and of limited potential.

However, they added that the region still faced tough competition from the Middle East, Asia and Africa where fields are bigger and the oil cheaper to extract.

The attraction of the UK Continental Shelf has also been damaged by the Government's decision to increase taxation on North Sea producers by a third.

The UK Offshore Operators Association estimates that the move will cost North Sea producers an extra £8bn and put 50,000 jobs at risk.

In a recent survey, 90 per cent of operators said the tax rise would have a detrimental impact on their appraisal and exploration plans.