AN Israeli-owned oil and gas firm is set to provide a £400 million vote of confidence in the North Sea under a plan to squeeze an extra 40 million barrels out of a venerable oil field.

Ithaca Energy has said it will go ahead with a project to boost output from the Captain field 90 miles north-east of Aberdeen after winning approval for its plans from the Oil and Gas Authority.

The company will implement stage two of an Enhanced Oil Recovery scheme using technology it says has been shown to be effective.

Chief executive Bill Dunnett said consent for the stage two work progresses the application of a technology that has already demonstrated an improved recovery rate and will help extend the life of Captain. The billion barrel field has been onstream since 1997. Production is running at around 27,000 barrels of oil daily.

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Mr Dunnett added: “This project underlines our long-term commitment to the North Sea and is a major demonstration of confidence in the viability of safe, long-term operations in this basin.”

The decision to go ahead with stage two work has been endorsed by Korean-owned Dana Petroleum, which has a minority interest in Captain.

It will be welcomed by North Sea industry leaders amid the deep downturn in the area triggered by the fallout from the coronavirus crisis.

Firms slashed spending on new assets and upgrades in response to the resulting fall in oil and gas prices, causing pain across the supply chain.

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The work on Captain could provide a valuable boost to oil services firms and the like.

It will involve injecting fluids into the Captain reservoir in order to flush out more oil. This will require Ithaca to drill additional subsea wells and to install related subsea infrastructure and new facilities on the production platform.

Sector watchers will hope that the decision to approve the stage two work will help persuade other firms that it is worth investing in mature North Sea fields. It underlines the potential to draw on advances in technology to help maximise recovery rates.

The market environment has become more favourable in recent months.

The Brent crude price has risen by more than 50 per cent since November amid hopes that coronavirus vaccines will fuel a strong recovery from the economic damage caused by the pandemic around the world.

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This week oil giants BP and Shell said they benefited from an improvement in the price environment in the first quarter. Both have said the North Sea remains a core area, after selling off assets in the area in recent years.

Ithaca is owned by Delek Group, which expanded in the North Sea amid the shake-up in the area that gathered pace amid the last downturn.

Delek backed Ithaca to buy the North Sea portfolio amassed by US giant Chevron, in a $2 billion deal struck in May 2019. The acquisition left Ithaca with an 85 per cent interest in the Captain field.

Delek bought Ithaca in a £1bn deal in 2017, to help it build an international business.

Ithaca cut the book valuation of its assets by around $500m after tax last year in response to the downturn. However, it has continued to generate lots of cash from its North Sea operations.

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Production costs averaged around $16 per barrel oil equivalent last year, allowing Ithaca to make money at low crude prices.

Last month Delek chief executive Idan Wallace said Ithaca was an important anchor for the group, and a growth engine for its continued activity and for unlocking value.

In January Delek said it was considering floating Ithaca on the London and Tel Aviv stock exchanges under moves to bolster its balance sheet.

On Monday Haaretz newspaper reported that Delek was in talks to sell a stake in the giant Tamar gas field off Israel to Edinburgh-based Cairn Energy for around $1.1bn.

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Brent crude sold for around $63.30 per barrel yesterday afternoon.

The price fell from around $70/bbl in January last year to less than $20/bbl three months later.

Jongwoo Kim, chief executive of Dana Petroleum, said: “Dana has maintained an interest in the Captain field for many years. It is particularly exciting to see how extensive research alongside the application of new technology is being used with great efficiency to enhance recovery.”

The Korea National Oil Corporation acquired Dana for £1.9bn in 2010.