BP has said the start of production from a giant development West of Shetland will help it remain a significant North Sea player for decades as analysts highlighted the potential of other new fields in the area.

The oil and gas giant has started pumping crude from the Quad 204 scheme 110 miles off Shetland following a multi-billion project which has been years in the making.

Oil and gas industry leaders said the start of production from the development provides a welcome reminder the North Sea has a future following three years of gloomy headlines about the cut backs triggered by the crude price plunge.

Deirdre Michie, chief executive of Oil & Gas UK, said: “This is excellent news and another positive endorsement of the potential the UK Continental Shelf still offers with the right investment.”

She added: “As well as being a welcome boost for the hard pressed supply chain, the announcement … proves that our faith in the long term health of the basin is well founded.”

Ms Michie’s enthusiasm partly reflects the fact the start of production from Quad 204 provides a hugely visible demonstration that firms can bring new life to old North Sea fields by using modern production technology.

Quad 204 involved a revamp of the Schiehallion and Loyal fields. BP expects this will allow it to get an additional 450 million barrels out of the fields and to keep them in production until 2035 at least.

The fields were first developed in the mid 1990s and have produced 400 million barrels.

BP and Shell, which are partners in Quad 204, have made clear they expect to generate big profits from the fields’ output, even though crude is selling for less than half what it fetched when the redevelopment was approved.

Their confidence may help counter the perception that it is not worth investing in mature North Sea fields.

Oil & Gas UK will also have been pleased that BP emphasised Quad 204 forms part of a wider investment programme that will last for years. BP is also developing the huge Clair Ridge field west of Shetland with Shell, and investing in others.

Chief executive Bob Dudley said: “The start of production from Quad 204 – one of the largest recent investments in the UK – is an important milestone for BP, marking a return to growth for our North Sea business.”

The company said it expects to double its UK North Sea production to 200,000 barrels of oil equivalent a day (boe/d) by 2020 and to “sustain a material business in the region for several decades”.

It plans to drill up to five exploration wells in the UK over the next 18 months and to complete around 50 development wells over the next three to four years.

The head of BP’s North Sea business, Mark Thomas said: “In safely delivering first oil from the Quad 204 project, we have succeeded in one of the largest ever UK mid-life offshore redevelopments.”

He added: “BP has developed a strong track record of finding, developing and operating big offshore oil resources west of Shetland - we have and will continue to use the latest technology to maximise recovery from the Schiehallion Area.”

The Quad 204 project has involved installing 21 risers, most of which will take production from subsea wells to the giant floating production storage and offloading vessel developed for the project.

BP has announced plans to cut around 900 jobs in the North Sea since 2014 and sold non-core assets.

Separately Macquarie investment bank predicted Cairn Energy would be generating around $350 million (£270m) a year from new North Sea fields by 2020.

Edinburgh-based Cairn expects to start production in coming months from the Kraken and Catcher fields. These lie 75 miles east of Shetland and 120 miles east of Aberdeen respectively.

Macquarie reckons Cairn will be producing 25,000 boed from the fields within the next 12 months.

It has increased its target price for Cairn shares to 270p from 246p.

The change takes account of the positive results Cairn obtained from recent appraisal drilling on a big discovery the oil and gas firm made off Senegal and the progress it has achieved in the North Sea.

Cairn bought its way back in to the North Sea under chief executive Simon Thomson, who succeeded Sir Bill Gammell in 2011.

Following Cairn’s general meeting on Friday, Mr Thomson said the company was screening the North Sea for acquisitions.

It will use the cash generated from production in the North Sea to fund exploration work in relatively under-explored areas such as the waters off Senegal and western Ireland and the Barents Sea.