PREMIER Oil has underlined its faith in the likely profitability of the giant Catcher field it plans to bring onstream off northeast Scotland in spite of the sharp fall in crude prices.

The company said it expects the price of oil to average $85 per barrel over the long term, although Brent crude traded at $78.54 per barrel yesterday afternoon.

The price of oil has plunged by around 30 per cent from $115/bbl in June amid strong supplies of crude and weakening demand.

Premier said of Catcher yesterday: "The project economics remain robust at lower than current oil prices since the development benefits from a low cash breakeven and the group's significant UK tax loss and allowance position."

Edinburgh-based Cairn Energy has a 30 per cent stake in Catcher.

Premier said work is progressing on the Solan development west of Shetland.

The company increased UK production to 19,963 barrels oil equivalent per day in the ten months to 31 October, from 13,753 boed in the same period last year, helped by strong performance by the Balmoral area assets.

Premier has put hedges in place to mitigate the effect of falling oil prices. It appears to believe long-term demand and supply factors will result in the Brent crude price recovering some of the ground lost in recent weeks.

Chief executive Tony Durrant said: "Looking forward, new projects will be sanctioned if they are robust at our long-term oil price which is currently $85/bbl."

Still, the company has decided to phase the development of the Sea Lion field off the Falkland Islands to reduce the initial cost.