Bidders line up for £1bn oil strike

Contracts worth £1.2bn are up for grabs to build an oil platform to tap the most significant North Sea oil finds for a decade.

Construction and engineering firms including Amec and Swan Hunter are ex- pected to bid for chunks of the work. Winning would secure hundreds of jobs in the UK's offshore engineering industry, which is in the early stages of a renaissance after seemingly terminal decline.

Plans for the "Buzzard" project, which is being led by Canadian oil and gas company Encana, are expected to be approved by the Government in the next few weeks. The Government is encouraging oil companies to exploit the black stuff left in the North Sea.

"We must ensure that oil and gas resources within the UK continental shelf are fully and effectively exploited, and we need to maintain the UK's pre-eminent position as a centre of expertise for the sector," energy minister Stephen Timms told offshore gas workers earlier this month. "There is still a great deal of oil and gas to extract, and plenty of opportunities for those with the drive and determination to realise them. The recent success of the Buzzard discovery, the largest UK offshore oil find in 20 years, underlines the point."

Construction of the large three-platform complex is expected to start next year and Encana is putting the main contracts for the work out to tender. Amec, the Hartlepool yards of Dutch offshore specialist Heerema, Norwegian engineering firm Aker Kvaerner and Spanish construction firm Dragados are expected to compete for the bulk of the construction work, worth up to £950m. Swan Hunter is looking to bid for smaller contracts.

"The capital expenditure is four times higher than anything else in the next few years; it dwarfs the spend on the other oilfields," said Geoff Gillies, a UK analyst at energy consultancy firm Wood Mackenzie. "It is a very significant development for the industry in the UK."

He estimates the value of the contracts at £1.2bn. The amount of oil recoverable in the field is estimated at 460 million barrels - worth around $12bn (£7bn) at today's oil prices. After construction, the platform will be floated out in 2006 and will extract its first crude oil the same year. The field, 100km north east of Aberdeen, was discovered in 2001.

Swan Hunter is close to putting in its price estimates for the smaller well-head platform. It hopes it will plug a gap in shipbuilding projects for the Ministry of Defence.

"The contracts and procurement competitive tendering process for the Buzzard development is now under way," Encana said.

Alongside the company, Intrepid Energy, BG and Edinburgh Oil & Gas are the other project shareholders.