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British oil giant, BP Plc (BP - Analyst Report) announced the successful start-up of the $1.04 billion (£650 million) Devenick gas project, a large offshore field in the Central North Sea in the U.K.

Devenick is a high-pressure, high temperature (HPHT) gas condensate field − discovered back in 1983. It is estimated to contain 430 billion standard cubic feet of gas. The field has been tied back with a 16 inch pipeline to the Marathon Oil Corporation (MRO - Analyst Report) operated East Brae platform to facilitate domestic gas supply for the country.

Located 34 kilometer north of the East Brae platform in the Central North Sea, the Devenick field is projected to reach its peak production of up to 100 million standard cubic feet of gas per day (MMscf/d) next year and last until 2025.

BP owns 88.7% of Devenick and its partner on the project, RWE Dea UK, holds the remaining 11.3%. The company expects to expend net $10 billion over the next five years in the North Sea comprising major ventures in U.K. and Norway. Apart from Devenick, BP has three other major ongoing projects offshore U.K. that include: Clair Ridge, Quad 204 (Schiehallion) and Kinnoull. Additionally, it includes Skarv and Valhall redevelopment in Norway.

Fossil fuel productions in Britain will likely turn down in the near future, thereby leaving U.K. to rely upon imported hydrocarbon. Following the successful start-up of the Devenick project, U.K. gas production will see an approximate 3% boost from the current level. This is expected to be sufficient enough to deliver the equivalent of more than half a million homes annually.

London, England-based BP is one of the world's largest energy companies. BP retains a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months. We maintain our long-term Neutral recommendation for the company.

We consider the gradual economic recovery after the Gulf of Mexico (GoM) tragedy and BP’s focus on upstream activity as favorable factors. Management remains positive on the company’s growth profile and looks forward to recovery, as well as consolidation, in order to reduce operational risk or oil spill-related assignments.

We believe the company's new strategy of active portfolio management, higher exploration activity, and refining and marketing repositioning will generate value for shareholders. Its focus on a string of upstream activities in high margin areas like the GoM, Angola, the North Sea, Brazil, Australia and India bode well for its future growth.

However, we remain apprehensive following BP’s weak second-quarter performance. BP also projected a lower production level for the year on a year-over-year basis. The GoM spill in 2010 and the failed Russian Arctic deal have undoubtedly weighed on BP shares.

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