Larry Kinch�s attempts to build a third oil and gas success story appear to have run into serious complications following a set-back on a key project

Larry Kinch's attempts to build a third oil and gas success story appear to have run into serious complications following a set-back on a key project.

Accounts for the Energy Development Partners (EDP) venture established by Kinch indicate directors have gone back to the drawing board after investors in a fund raised by EDP asked the company to stop making investments on their behalf.

In their report to the accounts covering the year to December 2007, directors indicate the investors acted after efforts to start production from an offshoot of the giant Brent field in the North Sea came to grief.

"The first project undertaken by the fund was the development of the Barnacle field, which lies close to the Shell-operated Brent field. The well was commenced in April 2007 but operational difficulties were encountered from the early stages of the drilling programme leading to serious delays and very significant cost escalations.

"The problems could not be resolved and Shell and their drilling contractors have so far been unable to complete the well or bring it into production. The well is currently suspended."

Other comments in the report suggest the reverse will have significant implications for EDP. "For the moment the investors have indicated to the company that they do not wish further investments to be made on behalf of the fund.

"The existing cash reserves of the company are sufficient to allow it to continue in operation well into 2009. During this period directors intend to create an alternative business strategy for the company."

The reverse may be a relatively unfamiliar experience for Kinch.

The PES services operation established by Kinch was sold to Halliburton for £111m in 1986. He was one of the founders of Venture Production, a firm specialising in developing unfancied North Sea assets that floated in 2002.

Kinch established EDP in 2003 to invest in developing oil and gas fields. In 2005, the company raised a $350m fund to invest in projects.

EDP signed up to develop Barnacle in 2006, with production expected from 2007.

After receiving management fees of £3.4m in 2007, EDP made pre-tax profits of £983,000. In 2006, it made pre-tax profits of £296,000, on fees of £2.7m.

The directors did not respond to a call seeking comment on developments at the firm.