PREMIER Oil is taking full control of the giant Solan oilfield development West of Shetland, which has been hit by delays, in a deal that could be worth up to $100 million (£65m) in royalty payments.

The London-based company is acquiring the 40 per cent owned by North Sea-focused Chrysaor, to add to the 60 per cent stake it already holds in what it calls a key asset.

Premier has spent around $1.5bn developing Solan to date.

The company is showing faith in Solan months after it slashed the valuation of the asset in response to the plunge in the crude price since June last year and delays in work on the field.

In February Premier said the commissioning of production facilities installed off Shetland for Solan had taken longer than anticipated due to poor weather conditions and low productivity over the winter period.

The setback underlined the scale of the challenges involved operating in the stormy waters off Shetland.

However, majors including BP and Shell appear to remain enthusiastic about the area where they are investing huge sums developing giant fields. Shell has signalled it will sell off more mature North Sea assets in response to the fall in the oil price.

Stock market-listed Premier said yesterday: "With improved weather, better progress has been made with the commissioning work on the Solan facilities."

It is targeting first oil in the fourth quarter this year, rather than the second quarter originally.

In May Premier said production from Solan is expected to plateau at 20,000 barrels oil equivalent daily to 25,000 boed. The company, which is developing the Catcher field off North East Scotland with Cairn Energy, would expect to generate significant amounts of cash from production at those levels.

Chrysaor owes around $550m for its share of the project costs. Premier expects the money owed by Chrysaor will eventually be repaid from production from Solan.

In February Premier's finance chief Richard Rose appeared to expect a faster repayment process. He told analysts Premier was looking at Chrysaor refinancing the $550m loan and thought a number of bankers might be involved in the process in spite of tough market conditions.

Mr Rose added that he thought Chrysaor might be able to refinance the loan and pay Premier $200m or $250m.

Under the deal announced yesterday Premier will acquire Chrysaor's 40 per cent for no upfront payment.

The company will pay royalties to Chrysaor in respect of production from Solan totalling up to $100m after allowing for repayment of a notional outstanding loan of $530m plus accrued interest.

Separately, Premier will raise $100m by selling 15 per cent of the production from Solan to the Flowstream Commodities finance operation for a period that will depend on output levels and oil prices.

Premier will make a final payment to Chrysaor in respect of its share of the value of Solan after deducting a 40 per cent share of the total project costs including decommissioning charges.

Chief executive Tony Durrant said: "The agreement with Chrysaor enables us to focus on delivering first oil from the Solan project without partner funding concerns, while the transaction with FlowStream reduces our balance sheet exposure to the project and releases capital to fund completion of the development."

Analysts at Royal Bank of Canada said the Flowstream deal provided a welcome third party endorsement on the project.

Premier acquired a 60 per cent stake in Solan from Chrysaor in 2011 for $20m and a share of the development costs of the project.

The company agreed to provide a loan to fund Chrysaor's remaining share of the project costs, which would be repaid from a share of revenues.

Founded by two veterans of the North Sea industry, Phil Kirk and Robert Poddubiuk, Chrysaor aims to progress discoveries in the area that it believes have commercial development potential.

The privately-owned firm is based in London with an office in Aberdeenshire.

Shares in Premier Oil closed up 11.4p at 167.6p.

Separately, Oranje-Nassau Energie of the Netherlands flagged its appetite for acquisitions in the UK North Sea after it bought a 50 per cent interest in the Sean field off eastern England from Shell and ExxonMobil.

Chief executive Alexander Berger said the company had the balance sheet strength to support growth, adding: "Our ambition is to become the preferred Southern and Central North Sea operator."