NORTH Sea oil and gas sector watchers were queueing up yesterday to applaud the start of production from the giant Kraken field off Shetland. The event involved one of the biggest fields to come onstream off the UK for years. It was especially welcome because the work that led up to the launch confirmed the potential of a project that was approved before oil prices plunged in 2014, triggering a downturn that has taken a heavy toll on the North Sea.
With the investors in Kraken expecting to make good money from the output from the field, the start up will encourage hopes other firms will go ahead with long term investments in the area.
Kraken is one of a number of heavy oil fields that were left undeveloped for years because of the challenges involved in producing from them. Advances in technology benefited Kraken and may help change the economics of other such fields.
EnQuest, which led on the Kraken development, highlighted the fact it delivered the project for around 20 per cent less than expected.
Some may be wary about attaching too much significance to Kraken, however. The cost savings may reflect pressures on the supply chain in an area where services firms are competing for a limited supply of work. Xcite Energy Limited went into liquidation last year after facing funding challenges in its attempt to develop the Bentley heavy oil field off Shetland. The generous tax breaks provided on heavy oil projects mean the taxpayer will not get a share of the profits EnQuest makes from Kraken for years.
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