PREMIER Oil has said it is now making good progress with the delayed development of the giant Solan oil field West of Shetland, which it expects to bring onstream later this year.

London-based Premier said it has been achieving high productivity levels offshore Shetland where the company has faced problems operating in harsh conditions.

After pushing back the start of production from Solan in February, Premier slashed the valuation of the field by $385m (£250m) last month to reflect cost increases and the plunge in the crude price.

News of the recent progress came on a day French giant Total noted it had faced challenges developing a terminal to handle gas from the giant Laggan Tormore gas field West of Shetland, which is expected onstream in coming weeks.

Announcing plans for deep cuts in capital expenditure on new projects in readiness for a long period of low oil prices, Total signalled it will keep a very tight rein on costs in the UK.

In a presentation to investors, the company forecast a 20 per cent reduction in the number of people working on its mature UK fields by 2017, compared with last year. This suggests the loss of around 200 contractor positions.

Chief financial officer Patrick de la Chevardière told reporters the company was determined not to cut payouts to investors, although the price of Brent crude has tumbled to around $48 per barrel, from $115/bbl in June last year.

He said: "We wanted to dramatically reduce capex again next year so that we can reach the very important target of covering the dividend at $60 per barrel in 2017. This is the cornerstone of everything we are doing.”

Led by chief executive Tony Durrant, Premier Oil said it continues to forecast a significant reduction in year-on-year capex in 2016.

The company has taken steps to withstand what could be a long downturn.

Premier has struck deals to sell around 60 per cent of its expected oil and condensate production for the second half of this year at $92/bbl. It has sold 30 per cent of its expected liquids production in 2016 at $68/bbl.

Directors said the company has achieved significant cost savings which should allow it to produce oil and gas at $16 per barrel oil equivalent this year. It cut the rates paid to UK contractors earlier this year.

Premier, which also has assets in Asia and off the Falkland Islands, said it continues to enjoy significant liquidity with $1.3 billion of cash and undrawn credit facilities.

Production in the year to date as been ahead of guidance at 57,100 barrels oil equivalent daily, against a target of 55,000 boed.

The company's shares closed up six percent, 3.9p at 67.5p following the news. They had fallen 67 percent over the past four months as the price of crude dropped.

The chief executive of Total, Patrick Pouyanné, told investors capex would fall by up to 15 per cent next year, to $20bn - $21bn from $23bn to $24bn.

Total sold a 20 per cent stake in Laggan Tormore to Scottish Hydroelectric owner SSE for £565m in July.

Yesterday Total said it had learned lessons from work completed onshore Shetland. These included the need to better anticipate site specific issues and for better control of the contractors/supply chain.

Petrofac has lost around $490m on the £500m contract it won in 2010 to build the onshore terminal to handle gas from Laggan-Tormore.

In February Premier said it had cut the book value of a group of UK fields including Solan by $730m partly to reflect the impact of the fall in the oil price.

The company pushed the expected start of production back from the second quarter of this year saying work on the production facilities had been hampered by poor weather conditions and low productivity over the winter period.