Chevron, the US oil group, has raised doubts if it will proceed with its £6 billion (€7bn) Rosebank oil project 130km west of the Shetland Islands, a move that will send a chill through the North Sea oil industry.

Any decision by Chevron to pull out of Rosebank, one of the biggest oil developments in UK waters, would be a body blow for hopes of reviving oil production in the North Sea.

In a statement Chevron said the project “does not currently offer an economic value proposition that justifies proceeding with an investment of this magnitude”.

It said it had conveyed that message to the UK government.

Chevron said it was working with its partners – OMV of Austria and Denmark's Dong Exploration and Production – to find ways of strengthening the project economics.

The company insisted, however, that it had not suspended Rosebank, and remained in the front-end engineering and design stage of the project.

Rosebank, which had an initial price tag of £6 billion, has fallen victim to rising costs in the oil industry which have hit offshore projects especially hard.

The area west of Shetland, where the Rosebank field was discovered in 2004, is virtually the only part of UK waters where oil and gas reserves have yet to be exploited. Located on the very edge of the UK continental shelf and closer to the north Atlantic than the North Sea, it is considered one of the most challenging environments for oil companies, even those such as Chevron with plenty of experience of working offshore.

Some 41 billion barrels of oil and gas have already been produced from the UK continental shelf, and 20 billion or more could still be produced. However, the easy oil has all gone: the average size of new discoveries has dropped significantly, while the technical complexity of the remaining reserves is rising. – (Copyright The Financial Times Limited 2013)