ENQUEST and Cairn Energy have started production from the giant Kraken oil field 75 miles east of Shetland in a development experts said showed there is still life in the North Sea even at low crude prices.

The 130 million barrel field is one of the biggest to be brought into production off the UK in recent years and is expected to be onstream for more than 20 years.

The start of production will provide a big fillip for the North Sea oil and gas industry, which is in the fourth year of the downturn that set in after the crude price started tumbling in 2014. This has resulted in firms slashing investment and shedding thousands of jobs in total.

Welcoming the start up of Kraken, Scottish Secretary, David Mundell, said: “This is fantastic news and will help ensure skilled, secure jobs in the vital North Sea oil and gas industry, which is very much still open for business.”

The chief executive of the Oil & Gas UK trade body, Deirdre Michie, said Kraken showed once again what the North Sea can still deliver with the right approach and investment.

The comments reflect hopes EnQuest and Cairn’s experience with Kraken will encourage other firms that it is worth the risk of making big investments in North Sea assets.

The project was approved in 2013 before the crude price plunge started, as growth in supplies ran ahead of demand.

EnQuest and Cairn expect to achieve good returns on the production from the field.

The startup is likely to fuel interest among oil and gas firms in the stormy waters off Shetland.

Advances in exploration and production technology are encouraging firms to look more closely at the area, in which there has been relatively limited drilling over the years.

Kraken is one of a number of heavy oil finds that were made off Shetland in the 1980s and were left undeveloped because the cost of processing the output was seen as prohibitive.

Norway’s Statoil expects to bring the 250m barrel Mariner heavy oil field East of Shetland on stream next year.

Interest in the potential for making new finds has been boosted by the success that Hurricane Energy has enjoyed with the drill bit west of Shetland.

The Surrey-based firm has found a field that may contain up to 1 million barrels in an under-explored layer beneath the sandstone on which attention has focused.

Oil and gas firms are also showing interest in the Rockall basin west of the Hebrides.

However, Xcite Energy went into liquidation last year after facing funding challenges in its attempt to develop the Bentley heavy oil field off Shetland.

The chief executive of London-based EnQuest, Amjad Bseisu, said: “With production from Kraken, EnQuest is moving from a period of heavy capital investment, to a focus on cash generation and deleveraging.”

While Edinburgh-based Cairn made no comment yesterday the company has made clear it is excited about the potential for Kraken.

Chief executive Simon Thomson has said the company expects to use the cash generated from Kraken to fund exploration work around the world.

The scale of Kraken means it is possible to produce oil relatively cheaply from the field using modern production techniques. Output is due to plateau at around 50,000 barrels daily.

The expected cost of developing Kraken has fallen sharply since it was approved, to $2.5bn from $3.2bn.

The costs of support services have dropped amid the downturn since 2014.

Cairn bought into the field through the £414m acquisition of Nautical Petroleum in 2012. It has 29.5 per cent of Kraken while EnQuest has 70.5 per cent.

Cairn and Enquest increased their stakes in Kraken at little cost last year after buying interests from Aberdeen-based First Oil Expro, which went into administration.

It has been estimated that Kraken would support more than 20,000 UK jobs during construction and an average of around 1,000 in each year of operations.

Kraken was discovered by Occidental Petroleum in 1985.