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Up to 50,000 barrels of oil per day is coming out of a North Sea development that cost about $1 billion less than anticipated, regional leaders said.
British exploration and production company EnQuest announced Monday that oil production started from its Kraken field in the North Sea. Describing the operation as transformational, the company said gross development costs are around $2.5 billion, down from the $3.2 billion estimated initially.
"The achievement of producing first oil from Kraken on schedule and considerably under budget is a great testament to the capabilities of EnQuest," Richard Hall, the head of major projects for EnQuest, said in a statement.
British Energy Secretary Greg Clark said it was a landmark project for the region and could potentially support "thousands" of jobs in the region.
The development start marks a recovery for a region that experienced a downturn in capital spending because of weakened crude oil prices last year. While oil prices are still low by relative standards, operators are becoming more efficient.
A North Sea review from consultant group Wood Mackenzie found more than a dozen new oil and natural gas fields are expected to enter into production this year. While new developments looking forward are scarce, about 30 percent of the production by 2020 will come from fields that aren't yet fully operational.
EnQuest last year, for an undisclosed sum, took a stronger hold of the Kraken field alongside its non-operator partner Cairn Energy. EnQuest said it was now moving from a capital-intensive phase to one where it expects to generate cash.
For full-year 2016, production for EnQuest improved 8.7 percent and cash generated from its portfolio of operations improved 45 percent to $408.3 million. Debt at the end of the year, however, was up 16 percent to nearly $1.8 billion.
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