BP has given the Scottish oil industry a huge vote of confidence by creating 1000 new jobs through a £700 million project to extract oil from a North Sea reservoir.

The Kinnoull site is the largest of three reservoirs which are being developed as part of the wider project in the Andrew platform area.

BP said production from Kinnoull, which will begin in 2013, is forecast to peak at 45,000 barrels per day.

The work, which involves upgrading the Andrew platform about 142 miles north-east of Aberdeen, will create jobs in Wick, Invergordon, Newcastle, Hartlepool, Leeds and Bristol.

Fears were raised that oil companies would cut their investment in the North Sea after Chancellor George Osborne announced in this year’s Budget that Britain would raise a supplementary charge on oil production from 20% to 32%.

First Minister Alex Salmond warned yesterday the windfall tax caused “great damage”, describing the move as a “cack-handed” decision.

He said it had “without doubt” resulted in the cancellation of projects that would otherwise have gone ahead.

But Trevor Garlick, regional president for BP’s North Sea business, said the Kinnoull project was a “further demonstration” of BP’s vision to sustain a material and high-quality business in the North Sea region.

He said: “It is also a showcase for the outstanding subsea expertise that exists within the UK. At its peak, the project will create employment for over 1000 people in the UK.”

Work on the Andrew platform will include the addition of a 750-ton process module. Construction will be completed over two years, with the platform expected to shut down for 18 months.

Since it started production in 1996, BP’s Andrew platform has processed and exported more than 200 million barrels of oil and the equivalent of a further 40 million barrels in associated gas.

Energy Minister Charles Hendry said: “With around 90% of the development involving UK firms, this is a real big win for our domestic supply chain and shows the thriving North Sea oil and gas sector continues to deliver economic benefit.

“I hope major global players continue to harness the expertise of UK companies as new developments come forward.”

Last month, engineering giant Aker Solutions unveiled a Scottish expansion plan that will see it recruit 300 staff at its Aberdeen-based oil services division.

The company, which is headquartered in Oslo, said the move follows a successful start to the year and added that it has grown its order backlog by 19% since the beginning of January.

Meanwhile, a device to seal off an oil well in the event of a spill has been unveiled, just weeks after more than 200 tonnes spilled into the North Sea from a leak.

The 40 tonne well cap shuts in and holding pressure on a leaking well and uses valves to close down the pipe and stop oil flowing into the sea.