SHETLAND oil exploration pioneer Hurricane Energy has moved within an ace of starting production from a giant find as the crude price increased amid tensions in the Middle East.
Read more: Shetland oil finds may hold 2.6 billion barrels
Brent crude rose around $1 per barrel to $71.60 yesterday following reports at the weekend that four tankers had been sabotaged close to a major route for exports from countries such as Saudi Arabia.
The attacks on ships off the United Arab Emirates heightened concern about further disruption to supplies of crude following moves by the US to tighten sanctions on Iran.
With supplies from Venezuela and Libya vulnerable, analysts expect growing tensions in the Middle East will lend support to crude prices in coming months.
This will make it increasingly likely prices will remain above the levels required to encourage firms to invest in projects in areas such as the North Sea.
Against that backdrop developments at Hurricane Energy will be followed closely in the North Sea oil industry.
The company generated huge interest after making bumper finds West of Shetland while other firms slashed spending off the UK in response to the plunge in the crude price from 2014 to early 2016.
Read more: Shetland oil pioneers shrugs off 'Monty Python slap in the face with a wet fish'
Surrey-based Hurricane appears to be making good progress with plans to bring the first of these finds, Lancaster, into production after facing complications earlier this year.
Estimated to contain around 500 million barrels oil Lancaster is one of the biggest finds made on the United Kingdom Continental Shelf in recent years.
Hurricane said yesterday that the giant floating production, storage and offloading (FPSO) facility developed for Lancaster has received its first hydrocarbons. This has taken Hurricane into the final stage of the commissioning process for the facility meaning first oil from Lancaster could be just weeks away.
Hurricane did not give an expected date for first oil, which is targeted for the first half.
However, with shares in Hurricane rising around eight per cent after yesterday’s announcement, investors appeared to be increasingly confident about the prospects for the Lancaster development.
Read more: West of Shetland fields could be 'game changing' for oil and gas industry
Hurricane expects to produce around 17,000 barrels oil daily from the Lancaster early production system, which could pave the way for a bigger development.
The progress achieved to date has left the firm with a £1 billion stock market capitalisation, 15 years after exploration veteran Robert Trice started the business in his garden shed.
Mr Trice decided to focus on the fractured basement zone West of Shetland. This lies beneath the sandstone on which North Sea exploration has focused.
Hurricane’s success has encouraged other firms to explore West of Shetland. These include Centrica, which bought into the acreage containing Hurricane’s Warwick find.
But the United Kingdom Continental Shelf faces strong competition from areas in which operating conditions may be easier.
Wood Mackenzie said yesterday that high-quality prospects in deepwater sweet spots, such as Brazil, Guyana, the Gulf of Mexico and the East Mediterranean, are attracting the most attention.
“The UKCS is not one of the industry’s global exploration hotspots, but it remains of interest to many companies,” said Andrew Latham, vice president exploration at the Edinburgh-based consultancy.
Read more: Biggest find in more than a decade shows still lots to go for in North Sea
He noted there had been two important commercial UK North Sea discoveries in the past year, with Total’s Glendronach well and CNOOC’s Glengorm find. Wood Mackenzie expects around 15 exploration wells to be completed this year.
HSBC analysts raised their Brent crude forecast for this year to $67/bbl from $65.2/bbl. Brent fell from a four year high of $85/bbl in October to around $53/bbl in January amid booming production in the USA.
Hurricane Energy shares closed up 3.73p at 50.55p.
In February Hurricane said a rope being used in the installation of the FPSO for the Lancaster field had failed. The preceding month a rope that was being used in the installation of production facilities got snagged.
The UAE has not said who was behind the sabotage on the tankers.
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