NORTH SEA OIL GAP BETWEEN POLITICIANS' DREAM AND ITS FULFILMENT

Press, Volume CXIV, Issue 33514, 20 April 1974, Page 14

NORTH SEA OIL GAP BETWEEN POLITICIANS' DREAM AND ITS FULFILMENT

• By

ADRIAN HAMILTON,

i Reprinted CJ arrangement)

ir, the "Financial Times' )

With Burmah’s confirmation of a giant oil field discovery aXinian. north-east of the Shetlands. North Sea exploration has come to dramatic and rapid maturity. If only half the potential now being ascribed to Xinian by the brokers proves correct, ifjvi]] prove a mammoth field, rivalling the enormous Forties and Brent f ieid discoverer of BP and Shell-Esso. In terms of production it could supply as much a? a quarter of the country’s cun-ent oil consumption while its reserves could put the field among the world's lop 100 and become one of the ta;gcs’ off-shore fields discovered outside the Middle Last.

j Mure importantly, how-, ever, th? Ninian discovery promises to set the sea! on one of the phenomenal stories in the history of oil exploration. Barely three and a half years after British Petroleum first proved the existence of major oil! reserves in the United Kingdom. North Sea with its Forties Field find, enough oil has now been found to sustain a production of 3; million barrels a day, put-’ ting the country on the, same level as Kuwait, Libya and Nigeria as a world pro-' ducer, and to supply sufficient oil to meet Britain’s! forecast requirements early; in the 1980 s. The country’s balance ofj payments deficit could be; wiped out. At current prices and higher tax terras, the revenues could total £3OOO million a year while the total expenditure in developing the oil could provide a| market for goods and ser-i vices worth some £4OO mil-; lion to £5OO million annually ’for the remainder of this' !decade — one of the largest, ! single new markets to! ’emerge for British industry! since the war. Yet before the public! ’starts to think of Gulf-style! I limousines for all and before; 'politicians dream of years of I ’annual Budget give-aways, it! I is as well to remember that! !the North Sea’s promise re-j ’mains just that — a promise’ I that has yet to be felt in I ’terms of oil in the tank. Ex-1 ploration, certainly, has’ already fulfilled many of the] hopes that were first held; out. But even here there re-’

■ mains more work to be done ' before ii is fully proved. 1 More sophisticated seismic techniques for mapping "structures, coupled with the ; 1 expense of drilling de’ineaItion wells in deep water, the ■ need to make investment de’eisions and order equipment Jas early as possible, all encourage oil companies to Mnake investment decisions 'and order equipment as ’ early as possible, al! encour-’ j age oil companies to make estimates of their dis-! Jcoveries far earlier than isj l traditional practice on land. i Drilling results j Of the 16 United Kingdom' ■; off-shore fields considered; commercial, in only three; ; cases — Forties, Piper and; i Brent — have drilling re-j ■ suits been sufficiently defini-i tive for official reserve esti-j mates to have been made;! 'even in these cases further! drilling and production ex-| iperience may cause some; 'revisions. I Estimates of the reserves ’ ’and potential peak produc-l Ilion from the other 13 at’ ’present are tentative. Ninian; | looks large, but Burmahl .failed to find the oil-waterj ■ interface; until they have.; I the drilling results cannot be! |set against the seismic map; I of the structure to produce a: (reasonably confident esti-i (mate of size. Predictions, ’about other fields are even I more tenuous. i Nor should it be forgotten (that not a drop of oil has ’yet been landed from the ’United Kingdom sector of

the North Sea. At this stage ’the producing characteristics of the various fields and the “recoverability factors" — the amount of oil in the ’reservoir that can o<* brought out under current technology — look reason ably encouraging But Ninian and Hutton ar* among a number of the ■ fields reported to have very low gas/oil ratios, which ’might present problems of recovery and natural pres sure in the reservoirs during (Production; while the lesson iof the Dan Field — where i reservoir conditions deierio ’rated dramatically soon after 'production was started — ’remains as a cautionarv tale !to the industry. Meeting targets I The major uncertainty at this stage is whether devel (opment programmes will meet their targets. Mr Eric jVarley, the Energy Seer? [tarv. has already had to an Inounce that the output of the United Kingdom North ;Sea next year will be stn (tons tor an average 100,000 (barrels a day) instead of the ■2.5 m tons (500,000 barrels day) once expected, became of the delays in constructing the platforms for the Forties and Auk Fields. Both of them are now a year late Some idea of the pressure of work now building up can be seen by looking down a list of projects. This year should see Hamilton Broth ers’ Argyll Field start pro duction 'in early autumn from a specially-equipped mobile rig contracted for the purpose, pumping the oil into tankers through a single buoy mooring system. Next, year should see Shell-Esso start production from its Auk Field, using a per manent platform and tankers from April. Auk and Argyll are reia lively small beer and the ’real impact will come only 'when fields as big as Fort lies. Beryl and Piper start ’their production, hopefully. Ilater next year. By 1976. de ivelopment work should be lat a much faster pace with ’the start of output from a 'second platform on Forties ’and the beginnings of production from the Shell-Esso glam Brent Field north-east of the Shetlands in April. At the same time, the Signal group has talked of starting production from its Thistle Field, while for the next, year, Burmah has said that it hopes to start output from the Ninian Field. Platform problem? It is this massive effort involved in organising the East Shetlands Fields that provides the most question ’marks at the moment. With jthe addition of Ninian, there ’are now eight fields northleast of the Shetlands, each (of them in water depths of (around 500 ft or more, each requiring at least one plat (form and. in the case of ’Ninian and Brent, possibly (four and five and, joined together, needing at 'least two ; major 36-inch pipelines to

I take the output to the Su. ■‘lorn Voe in the Shetlands.

! Apart from the investment involved — which could I total some £2500m — there must be doubts about the (contracting and platform ’construction industries to 'handle the load, particularly [in view of the continued [delays in getting concrete | platform construction sites approved ■ Looked at in this way, . Burmah's target date for I Ninian could well be on the [optimistic side and unless a ; major government-backed [push is made to divert [resources into this area 'these finds may not come I into production for six [years. Additionally, fields [take some time to reach peak production.

With a steel platform, which has to be piled into the seabed on site and the deck equipment added at sea, there may be a period of up to six months between the location of the platform on site and the start of the first production well. Each platform may then drill up to 30 wells or more, taking up to a month to complete, iso that peak output is not ’reached for three years.

Concrete platforms, which do not require piling into the seabed and which can be towed out with their deck equipment already fixed on top, require a shorter time for installation and are thus less subject to the hazards of weather, but drilling can take just as long. The picture of North Sea production, even if all goes according to schedule is. [therefore, likely to be a 'much more gradual one than generally recognised, with perhaps 500-600,000 barrels a day coming through in 1976 building up towards 1 'million barrels a day in late 1977-78. After that, much depends on the East Shet- ■ lands programme but, provided that all goes well, a figure of over 2 million bar rels daily — and possibly 2.5 million barrels — may be the production by 1980. This is not to be pessimistic about the prospects. A« 'exploration fulfils al! its (promise, it is the development side that will need all the concentration that oi! 'companies Government, [contractors and suppliers ‘can give.