The oilfield which is 90kms from the Nigerian coast was discovered in 1965 but it has become economically viable only recently with the development of new drillling technology.

The field - known as EA - would come onstream in 2002 and produce up to 120,000 barrels of crude per day.

The investment is the second stage of an $8.5bn scheme to develop the country's oil and gas fields over five years.

Earlier this year, nearly $2bn was released for the expansion of a major liquified natural gas project on Bonny Island in south-eastern Nigeria.

However, operations at the plant were disrupted when local protesters staged a blockade outside the site.

The demonstrators said they were angry at what they saw as years of neglect and lack of resources to develop local infrastructure.

Analysts say the latest move is further evidence of a shift to off-shore operations in Nigeria as political unrest makes onshore production more difficult.