ELAND Oil & Gas has started production in Nigeria, after experiencing delays on a project to revamp a field that was shut in by Royal Dutch Shell amid security concerns.

The Aberdeen-based independent said the Opuama field onshore Nigeria came onstream on Tuesday, in a development it described as a hugely significant milestone.

With Eland expecting output from the existing wells to stabilise at around 2500 barrels oil daily, the company's share of production will generate significant amounts of cash it could use to fund activity.

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Chief executive Les Blair said Eland hoped to "materially" increase production through development drilling during 2014.

Aim-listed Eland Oil & Gas acquired a minority interest in the OML 40 licence containing the field in August 2012, in a deal with Royal Dutch Shell, Total and Nigerian Agip worth around £95 million.

Shell Nigeria said the operations on the licence had been shut down since 2006 because of militant activity.

Eland had originally hoped to restart production from Opuama in the summer of last year. In August, it said it had experienced delays in contracting services and local permitting. In October it said it had been working with the Nigerian Petroleum Development Company (NPDC) "in a challenging operating environment" to repair infrastructure which had deteriorated since the site was closed.

State-owned NPDC has a 55% stake in the OML 40 licence.

Analysts at Eland's joint house broker Cannacord Genuity told clients: "First oil from OML 40... shows that through all the difficulties Eland and operator NPDC are able to deliver a successful result, which bodes well."

Shares in the company closed up 4.12p at 101.12p.