LONDON (Reuters) - Premier Oil <PMO.L> will press ahead with the development of the Tolmount gas field in Britain's North Sea, which is expected to produce around 500 billion cubic feet (bcf) of gas from late 2020.
The approval of Tolmount is the latest in a series of moves by oil and gas companies showing their commitment to the North Sea, traditionally a high-cost environment which is experiencing a revival as costs have fallen.
Premier expects to pay $120 million for the development, which includes a minimal facilities platform and a pipeline commissioned from Saipem <SPMI.MI> leading to British energy group Centrica's <CNA.L> Easington terminal.
Construction for the project, in which Dana Petroleum [KOILCD.UL] holds 50 percent, is to start this year.
"The sanction of our... Tolmount project marks a major milestone for Premier and underpins our medium term UK production profile," Chief Executive Tony Durrant said.
"Tolmount is one of the largest undeveloped gas discoveries in the Southern North Sea and is, in barrel of oil equivalent terms, similar in size to our Catcher project."
Centrica Storage Limited, a subsidiary of the British energy company, said it had been awarded a 120 million pound ($153 million) contract to process gas from the field which will extend the lift of its Easington gas terminal in Yorkshire until at least 2030.
Centrica said it will modify the terminal so it can receive and process the gas from the Tolmount field starting in the winter of 2020 when it is scheduled to come on stream. The field is expected to produce gas for 10 to 15 years.
Premier sees Tolmount's peak production at 300 million cubic feet per day, or 58,000 barrels of oil equivalent per day (boe/d). This is enough to supply around 2.5 million homes.
First output at Premier's Catcher field marked a milestone for the company last December, boosting a 10 percent output hike for 2018.
Shares in Premier, which is due to report first-half results on Aug. 23, rose 2 percent in early trading.
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(Reporting by Shadia Nasralla and Nina Chestney, editing by Louise Heavens)
