THE start of production from the giant Kraken field off Shetland in June by Enquest and Cairn Energy provided a welcome boost for the hard-pressed North Sea oil and gas industry.

The production facilities were installed on time and under budget. Thanks to the wonders of modern technology Enquest and Cairn expected to make handsome profits on the output from the field, even though the crude price had halved since the project was approved.

The project encouraged hopes the industry could enjoy a new lease of life in the relatively under-explored waters off Shetland.

But Enquest indicated yesterday that its average daily output could be much lower than expected this year due to the problems it has experienced on Kraken since starting production.

These reflect the difficulties it has faced developing the complex floating processing facilities required to handle heavy oil in an area where little infrastructure is in place.

Premier Oil was late starting production from the huge Solan field West of Shetland last year, after complaining of bad weather and low productivity. It then found it harder than expected to squeeze oil out of the field.

Kraken and Solan may be huge long term successes but the issues faced by the firms behind them may make others think twice about making big investments off Shetland.