BP has hailed the potential of the West of Shetland area after starting production from a significant field with encouraging results.

The company announced that it had produced first oil from the 20 million-barrel Alligin field on schedule and under budget and held out the prospect it could develop other finds in the area.

The head of BP’s North Sea business, Ariel flores, said developments such as Alligin underpinned the company’s growing portfolio in the West of Shetland area.

The field start-up has provided a boost for BP as it battles challenging market conditions.

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The company saw profits fall to $2.6 billion (£2bn) in the fourth quarter of 2019 from $3.5bn in the same period of 2018.

The fall in oil and gas prices from September amid uncertainty about the global economic outlook weighed on earnings.

Chief financial officer Brian Gilvary noted the Coronavirus outbreak could have a big impact on global demand and put further pressure on crude prices.

Alligin provides a reminder that BP has continued to invest heavily in some parts of its wider North Sea portfolio amid the retrenchment process completed in recent years.

BP cut hundreds of North Sea jobs and sold off a raft of assets in response to the slump in the crude price from 2014.

This compounded the problems caused by the disastrous spill on BP’s Gulf of Mexico acreage in 2010.

BP has focused spending globally on areas in which it sees the greatest long-term potential.

These include the relatively under-explored area West of Shetland, where it has completed multi-billion developments in recent years with Shell.

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The company can achieve high margins on the output from the fields. It can also use the infrastructure developed for them to bring smaller finds into production relatively quickly and cheaply.

The Alligin development was approved by in 2018, 23 years after the field was discovered.

BP developed the field with Shell by linking it to the Floating Production Storage and Offloading vessel that handles output from the revamped Schiehallion and Loyal fields. Production from Alligin has topped 15,000 barrels of oil equivalent daily compared with a forecast that output would peak at 12,000 boed.

Mr Flores said: “Alligin is part of BP’s advantaged oil strategy, a development with a shorter project cycle time with oil that is economic to produce.” He added: “Subsea tiebacks like this complement our major start-ups and help underpin our growing portfolio west of Shetland.”

Bob Dudley stood down as chief executive of BP following yesterday’s results announcement after nine years in charge.

He will be succeeded today by Bernard Looney, who has been running BP’s exploration and production division.

Mr Dudley said he was proud to be handing over a safer and stronger BP to Mr Looney and his team. “I am confident that under their leadership, BP will continue to successfully navigate the rapidly-changing energy landscape,” he said.

Mr Dudley expects oil and gas production will underpin growth in earnings at BP and allow the firm to meet its commitment to grow distributions to shareholders over the long term.

The company increased its dividend for the quarter by 2.4 per cent to 10.5 cents per share, from 10.25c.

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But Mr Dudley said BP has been playing its part in support of the effort to respond to the challenge of climate change. He noted the investment it has made in areas such as wind and solar power and biofuels.

Mr Looney said Mr Dudley had left BP with strong foundations and helped it gain real strategic momentum, adding: “I have some big shoes to fill.”

BP’s full year earnings fell to $10bn from $12.7bn.

Shares in BP closed up 4%, 18.85p, at 471.55p.

BP approved the Seagull development in the North Sea last year. This will be connected to the ETAP production facility off eastern Scotland.

It is considering developing the Murlach field as a tie back to ETAP.