British Energy Minister John Hayes announced he gave consent to a regional subsidiary of Chevron to drill in deep waters west of the Shetland Islands.
Hayes described the region as a new frontier in the development of the country's oil and natural gas sector.
"Production from our waters provides nearly half our energy needs, supports hundreds of thousands of jobs and provides billions in revenue so it is vital we thoroughly appraise all new possible resources," he said in a statement.
Chevron, on behalf of Hess Corp., aims to explore the Cambo-5 well, located in 3,500 feet of water.
Hayes said Chevron would operate in deep waters while taking lessons from the 2010 oil spill in the Gulf of Mexico in mind. This includes use of blow-out preventers and adequate cementing procedures.
A faulty cement barrier at an undersea well contributed to a series of failures that led to the 2010 incident.
"Chevron's plans and their emergency response measures have been thoroughly scrutinized by my department to make certain their conduct is of the very highest standard," Hayes said.
No timelines or reserve potentials were revealed by the British government.
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