Those behind the Cambo oil field have been handed a two-year licence extension.
The field, off the coast of Shetland has been controversial, with campaigners calling for it to be scrapped.
Now Siccar Point, the main stakeholder in the development says that the North Sea Transition Authority has awarded it an extension to the licence which was due to run out on Thursday.
It said in a statement: “Siccar Point Energy and joint venture partner Shell have been awarded a two-year licence extension for the Cambo field from the North Sea Transition Authority (formerly the Oil and Gas Authority).
“Siccar Point continues to work with its co-venturer Shell and the UK government to map out the next steps on Cambo.”
In December, Shell said the economic case for investment in the Cambo field was “not strong enough at this time” and warned of “potential for delays”.
On Wednesday, the company said its position had not changed but that the extension allowed for “all potential future options” for Cambo to be evaluated.
It comes after reports last week that Shell was preparing to reverse its decision to pull out of the field.
But campaigners have condemned the decision to award the extension.
Caroline Rance from Friends of the Earth Scotland said: “The UK Government is trying to keep this doomed oil field on life support but they are simply dragging out the inevitable rejection of Cambo and the transition away from fossil fuels.
“There is no safe future for new oil and gas production in the North Sea, Cambo and all new field developments must be rejected.”
There was a lot of pressure last year in the build-up and around COP26 in Glasgow to move away from drilling for new oil faster.
However, since then energy prices have soared for consumers with wholesale gas prices rising from around 46 pence per therm last March to more than £5 at one stage this month.
Russia’s invasion of Ukraine also sparked a rise in oil prices which meant fuel costs soared.
Earlier this week, the industry body OEUK said in its latest report that production could fall by up to 15% per year without investment in the North Sea.
It warned this would see us rely more heavily on imports.
Last year for the first time another country, Norway, was the main source of gas in the UK – more than the domestic supply.
However, green campaigners have warned that the best way to protect consumers from increasing costs is to move quicker towards domestic renewables.
The price cap for households on variable energy bills will rise on Friday by more than 50% with the UK Government due to publish an energy strategy in the coming weeks.