NORTH Sea-focused Independent Oil and Gas (IOG) is on track to start production from a landmark development after making progress amid challenging conditions.

Shares in IOG rose five per cent yesterday after the company said it expects to begin pumping gas from its first development in the third quarter of this year.

The start-up date is in line with the target set in October 2019 when IOG decided to go ahead with the scheme. This involves bringing finds that have lain undeveloped for years into production.

It made the decision to proceed after winning backing for the project from US billionaire Warren Buffett. This was a notable coup for a firm that is a relative minnow in an industry dominated by giants.

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Chief executive Andrew Hockey has said Independent’s share of the cash surplus generated from the development could be worth more than £500m.

However, the company has faced big complications since making the investment decision amid the turmoil in the industry triggered by the coronavirus crisis.

Oil and gas prices plunged last year after the imposition of lockdowns around the world hit demand.

Social distancing requirements have made it hard for firms to complete work offshore.

IOG’s project involves drilling wells and installing production facilities offshore and refurbishing a pipeline that had fallen into disuse, along with related onshore facilities.

The company said yesterday that it had started drilling the first of five development wells on the Southern North Sea fields included in the first phase of the project.

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Mr Hockey said the start of drilling was a key milestone. He said the progress achieved reflected effective collaboration between the company and Mr Buffett’s CalEnergy Resources and between the two partners and supply chain players.

“This drilling campaign has been planned meticulously by the IOG drilling, subsurface, subsea and HSE teams since early last year, in collaboration with our main drilling contractors Noble Corporation, Petrofac and Schlumberger and our partner CalEnergy,” said Mr Hockey.

“We have a very clear collective focus on ensuring safe and efficient performance leading successfully to First Gas in Q3 2021.”

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Mr Hockey has said IOG could use the earnings from its first development to fund growth. This could involve the firm developing other finds. Acquisitions are on the agenda.

CalEnergy Resources paid £40m in return for a 50% stake in the project and agreed to cover £60m of the first phase development costs.

Shares in London-based IOG closed up 1p at 21.5p, leaving it with a stock market capitalisation of around £105m.