NORTH-Sea focused EnQuest has seen its shares rise five per cent after it recorded strong growth in production helped by an “excellent” performance by a flagship field off Shetland on which it has faced challenges.

EnQuest said it increased production by 24 per cent in 2019, to 68,606 barrels oil equivalent daily, from 55,447 boed in the preceding year.

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Chief executive Amjad Bseisu highlighted the importance of the contribution of the Kraken heavy oil field East of Shetland that EnQuest developed with Cairn Energy.

“Kraken performance in particular has been excellent, with production efficiency above 90% for much of the second half of the year,” he said.

The comments highlight a marked improvement in the prospects for a development which has attracted lots of attention in the industry.

Kraken was left undeveloped for years because of the challenges that firms faced in producing heavy oil.

Advances in technology improved the economics of the field.

However, Cairn slashed its valuation of Kraken by $166 million in March last year.

Cairn generates bumper profits in North Sea after revenues hit $500m

The preceding month EnQuest noted that production in 2018 had been impacted by issues related to the weather and the Floating Production Storage and Offloading (FPSO) vessel used on the field.

Yesterday EnQuest said Kraken achieved higher than expected production in 2019, reflecting improved FPSO performance.

The news on Kraken could encourage other firms to invest in fields off Shetland.

The area is seen as relatively under-explored and contains limited infrastructure compared to parts of the North Sea in which there has been more activity. It has been attracting interest from firms that see more potential to make big finds there than in other areas of the wider North Sea.

But EnQuest’s decision to make big investments in mature fields off Scotland also appears to have paid off.

The company noted the Magnus field it acquired from BP has been performing well.

BP has sold a range of mature North Sea assets in recent years. It has invested heavily in big developments West of Shetland.

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Other big firms have offloaded North Sea assets in order to raise funds to invest in what they see as more promising areas, such as the US shale fields.

Sector watchers hope such transfers of ownership will help boost activity in the North Sea, which was hit hard by the fall-out from the crude price plunge from 2014.

Independents may invest in projects that majors may not consider to be big enough.

EnQuest launched a drilling programme on Magnus last year to help maximise the amount of oil produced from the field, which lies north east of Shetland.

The partial recovery in the crude price since late 2016 has encouraged firms to invest in North Sea developments.

Increased investment in field developments could help relieve the pressure on the North Sea supply chain.

EY said yesterday that green shoots of recovery could be seen in the UK oilfield services (OFS) sector. The accountancy giant said the sector returned to growth in 2018, with total turnover up a modest 2.3% on the preceding year.

But the head of EY’s oil and gas team, Derek Leith, said: “It’s clear that companies operating in the sector are still struggling to recover from the impact of the oil price slump and the unremitting pressure on pricing. Overcapacity in parts of the supply chain has meant that companies are, in some instances, still chasing prices down.”

The difficult conditions in the North Sea could encourage oilfield services firms based in Scotland to try to win more overseas business and to diversify into sectors such as renewables.EY found companies with broad geographic footprints, technological capabilities or who had successfully started to diversify were most optimistic.

Mr Leith said: “The UK OFS sector needs to continue to innovate and digitalise, integrate service offerings, exploit niche opportunities, and take advantage of diversification as part of the energy transition.”

EnQuest shares closed up 1.08p at 24.72p.