CAIRN Energy has suffered a drilling setback with a well to test a prospect off Shetland that had generated excitement in the wider North Sea oil and gas industry.

Edinburgh-based Cairn said a well it drilled on the Chimera prospect 84 miles east of Lerwick was dry.

The result appears to represent a significant reverse for Cairn, which had made plain it saw lots of potential in Chimera.

Last month chief executive Simon Thomson noted Cairn believed Chimera could contain 150 million barrels. He suggested success with the Chimera well would compensate for the three drilling reverses Cairn suffered off Norway in the first half.

Cairn suffers fresh drilling setback off Norway

He said Chimera was a high risk well but would be extremely valuable if it came off.

Exploration director Eric Hathon said Chimera had “material impact potential”.

Cairn’s belief in the potential of Chimera was shared by other firms.

Canada’s Suncor acquired a 40 per cent stake in the prospect last year. DNO of Norway bought a 15% interest earlier this year.

Success with Chimera for Cairn could have fuelled hopes for a recovery in exploration activity in the UK North Sea. Drilling fell to record lows in the area last year. The sharp fall in the oil price since 2014 has weighed on sentiment. Some firms see more potential to make big finds in the relatively under-explored areas off Shetland than in other parts of the North Sea.

Shetland discovery provides boost for oil and gas industry

Last year Cairn made a 50 million barrel find East of Shetland with Azinor Catalayst and Faroe Petroleum. It has exploration interests around the world.

Cairn Energy shares closed down 7.8p at 193.8p.