Of the £4bn investment, 80% is expected to be spent in the UK, and will create around 20,000 jobs during the construction period and an average of approximately 1,000 operational jobs a year.
This will also impact both EnQuest directly and supplier companies (such as engineering and drilling companies) that will work with EnQuest over the next 25 years.
The project – one of the largest to be announced this year – is expected to produce around 140 million barrels of oil over its 25 year life. EnQuest expect to begin oil production in 2017.
The Kraken field, which is estimated to contain nearly 140m barrels of oil, is majority-owned by Aberdeen-based EnQuest, which has a 60% stake in the field. Enquest’s minority partners are First Oil and Edinburgh-based Cairn Energy.
The Kraken development – about 80 miles east of Shetland and which was approved by the Department of Energy and Climate Change – is the largest investment announced in the UK North Sea this year.
The investment was made possible by government tax relief through the ultra heavy oil field allowance which allows companies to claim tax relief on up to £800m of their profits. EnQuest are investing in two heavy oil fields, and so will be entitled to an allowance for each.
Chancellor of the Exchequer, George Osborne, MP, said: “This is a big investment that will create jobs and boost the British economic plan. It is also evidence that our efforts to create a competitive tax regime that gets the most oil and gas out of the North Sea are working.”
Scottish Energy Minister Fergus Ewing said today: “I warmly welcome this announcement of £4 billion investment in the Kraken field east of Shetland and the job creation and supply chain opportunities it will bring. This follows on from a host of significant investment announcements recently – unequivocal evidence of the faith that the oil and gas industry has in the future of the North Sea as an oil producing province.”
“This is also clear evidence that new opportunities still exist in the sector. Scotland’s industry-led Oil and Gas strategy sets out an overall theme of maximising resource recovery through a focus on industry led innovation, skills and supply chain growth.
“With up to 24 billion recoverable barrels with a potential wholesale value of £1.5 trillion, more than half of the resources in the North Sea, by value, still to be extracted, it is clear that the industry will make an important contribution to the Scottish economy for decades to come.”