Shell will start drilling in the North Sea’s Penguin oil field - the firm’s first new manned project in the region for almost three decades.
The move is expected to support 300 to 400 jobs, mostly in Scotland, during the construction of a floating production, storage and offloading vessel for the new development.
Shell said the oil and gas field, which is 150 miles off the coast of Shetland, is expected to have a peak production of around 45,000 barrels of oil per day.
The announcement comes as the price of oil surged to $70 (£51bn) per barrel on Monday, meaning higher petrol prices for motorists and rising costs for many businesses.
Many North Sea platforms have shut down in recent years as oil prices had languished at historically low levels.
Shell announced last year that it had completed the sale of a package of North Sea assets for up to £3bn to smaller rival Chrysaor.
Steve Phimister, Shell's vice president for upstream in the UK and Ireland, said on Monday: “Shell has had a strong presence in this part of the northern North Sea for more than forty years.
“Having reshaped our portfolio over the last 12 months, we now plan to grow our North Sea production through our core production assets.
“In doing so, we will continue to work with the UK Government, our partners and the regulator to maximise the economic recovery in one of Shell's heartlands.”
Scottish Energy Minister Paul Wheelhouse said the investment demonstrates rising confidence in the region and will boost the Scottish economy.
The UK Oil and Gas Authority predicts that it will cost almost £60bn to decommission the North Sea’s existing oil and gas infrastructure between now and the 2050s with tax payers footing about 40 per cent of the bill.
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