NORTH Sea-focused Faroe Petroleum has highlighted the appeal of Norwegian acreage in the area as an investment bank predicted the crude price could remain under pressure for months yet.

Aberdeen-based Faroe Petroleum has started drilling a well on a prospect north east of Shetland which will cost the company nothing if it’s a dud.

It announced the start of drilling on a day Bank of America Merrill Lynch predicted that Brent crude would likely trade at around $50 per barrel for the next 18 months.

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Specialists at the bank said increases in output in shale areas in the USA would keep the lid on prices in spite of moves by Opec members to cut production to support the market.

Faroe is drilling the Goanna well in the Norwegian North Sea close to the border with the UK sector.

Chief executive Graham Stewart noted: “The company’s dry hole costs in the well are fully covered.”

The Aim-listed company said the costs of drilling will be fully carried by its partner Wellesley Petroleum up to the budgeted dry hole cost.

It won the licence concerned earlier this year with private equity backed Wellesley, which follows an exploration-led strategy focused on Norway.

Companies may offer to carry other firms’ cost to encourage them to participate in their exploration campaigns.

Wellesley’s directors include Graeme Sword who used to run private equity giant 3i’s oil and gas business.

Mr Stewart has said the generous tax breaks offered for exploration activity in Norway provide a valuable incentive to drill off the country.

He said Faroe will drill the Iris/Hades exploration well and Fogelberg appraisal well off Norway in coming months “taking advantage of low drilling costs and Norwegian tax incentives”.

Faroe does not have any exploration wells scheduled for the UK North Sea.

But the company expanded its UK production base in July by acquiring an additional stake in the Blane field from JX Nippon for $5.25m (£4.2m). It can set tax losses accumulated off the UK against profits made in the country’s waters.

Mr Stewart has noted opportunities to buy UK assets at attractive prices amid the downturn triggered by the fall in the crude price since June 2014, when Brent crude fetched $115/bbl.

It sold for $51.71/bbl yesterday afternoon.

In a research report on the global energy market, Bank of America Merrill Lynch noted US shale producers had achieved cost reductions that would help them to cope with low oil prices.

They said with US shale oil breakevens coming down to $40 to $60/bbl it was likely oil prices would trade around $50/bbl for the next six quarters

Brent would have to fall to $30/bbl before there were significant cuts in production in shale areas.