AN oil and gas heavyweight may invest more than $500 million West of Shetland under a deal that could stoke hopes of a bonanza in what is seen as a frontier area.

Spirit Energy is buying into licences held by a relatively small independent, Hurricane Energy, which has played a pioneering role in an area that remains under-explored compared with much of the North Sea.

Read more: Oil pioneer advances off Shetland

The acreage covered by the deal is reckoned to contain around two billion barrels oil equivalent.

Spirit’s chief executive Chris Cox said the transaction provided the company with a tremendous opportunity to participate in the early phases of one of the last known world-class oil development opportunities in the UK.

Spirit, which is owned by giant utility Centrica and German energy firm Stadtwerke München, has agreed to fund an $180m drilling campaign to appraise the Lincoln find made by Hurricane and exploration drilling on the Warwick prospect.

Mr Cox said a successful campaign could pave the way to a field development that would involve total investment of more than $1billion.

The deal underlines the scale of industry interest in the West of Shetland area where giants such as BP and Royal Dutch Shell are developing huge new fields.

Read more: West of Shetland in focus for BP after oil giant quadruples profits

Advances in technology have encouraged firms to look again at a remote and stormy area in which firms can face big operational challenges.

Mike Tholen of industry body Oil & Gas noted: “The west of Shetland, known as the ‘frontier’ region, has the greatest potential to expand current production. By acquiring a significant stake in these assets, Spirit Energy is demonstrating its confidence both in the basin’s growing competitiveness and the opportunities it continues to offer investors.”

Spirit’s move also reflects increased willingness on the part of oil and gas firms to invest in exploration and development projects in the North Sea following the rally in the crude price since late 2016, to above $75 per barrel.

Read more: Giants provide $600m boost for North Sea oil and gas sector

Oil and gas firms slashed investment in the North Sea amid the downturn triggered by the plunge in the crude price from $115 per barrel in summer 2014 to less than $30/bbl early in 2016.

The investment represents a major coup for Surrey-based Hurricane, which until relatively recently was a minnow ploughing a fairly lonely furrow off Shetland.

Founded by geologist Robert Trice in his garden shed in 2005, Hurricane has focused on an area of rock known as fractured basement, which lies beneath the sandstone targeted by most North Sea exploration activity.

The company has generated excitement since 2014 through its success with the Lancaster discovery, which is thought to contain around 500 million barrels. Hurricane expects to bring the initial phase of Lancaster on line in the first half of 2019 using a floating production vessel.

Mr Trice noted Spirit had worked on fractured basement assets in Norway.

Shares in Aim-listed Hurricane closed up ten cent, 4.71p, yesterday, at 53.95p.

Spirit will fund a $180 million (£139m) campaign to drill three wells 60 miles West of Shetland, from the first quarter of next year, in exchange for 50 per cent interests in two licences. It may then fund up to around $140m of the costs of an initial production well that would be tied in to the Lancaster facilities.

If the partners decide to proceed with a full field development Spirit will make a bonus payment of $150m-$250m towards Hurricane’s costs besides paying its own share.

Mr Cox noted the scale of the potential Greater Warwick Area development combined with the fact it lies in relatively shallow waters meant the firms should be able to complete it relatively cheaply on a per barrel basis.

Spirit employs around 350 in Aberdeen. It was formed from operations developed by Centrica and Bayerngas Norge.