Reasons abound to explain why Britain's offshore industry is currently in the dumps while Norway's is riding high, but a chief one may be a successful attitude.
The condition of oil and gas exploration and production in northwestern Europe ebbs and flows.
On the one hand is Great Britain, where North Sea and West of Shetlands (WOS) E&P efforts by numerous majors and a growing posse of independents seem to be waning. On the other is Norway, where E&P activity in the North and Norwegian seas by only a few majors and the state oil company appears to be climbing.
In recent weeks, industry and government interests in Britain have been complaining about steep declines in UK oil and gas exploration and production, even though by their own admission the country's shelf still holds up to half again as much oil and gas as already has been produced. Nevertheless, future spending for E&P looks to remain flat through 2006. A recent survey conducted by the UK Offshore Operators Association, for instance, estimates that spending for new North Sea/WOS offshore developments will remain at about 3.5 billion pounds sterling (US$6.5 billion) for the next few years, while production costs are expected to increase by about 60 percent during the same period.
And the gloomy outlook doesn't end there. Jobs, at least in certain "oily" areas, are being lost. For instance, despite a concerted--and highly successful--effort to expand UK petroleum industry savvy and know-how to the rest of the world, people in the UK's latest "oil capital," Aberdeen, apparently are thinking of nailing their shoes to the office floor after a couple of recent company layoffs left 300 there looking for work.
Meanwhile, in Norway, the country's quasi-governmental Petroleum Directorate (NPD) announced just the other day that while the final numbers aren't yet in, substantial investments continue to be made on the Norwegian shelf, amounting to something like NOK 62 billion (US$9.2 billion) last year, and that doesn't even include exploration spending. Whatever, it's an increase of NOK 10 billion ($1.5 billion) from 2002. And NPD estimates that nearly NOK 300 billion ($44.6 billion) will be invested on the Norwegian shelf in the period 2004 through 2008.
But that's not all. According to figures cited in Rigzone News last week, apparently supplied by the NPD, producers drilled 22 wells on the Norwegian shelf in 2003, making 11 new discoveries--seven in the North Sea and four in the Norwegian Sea. They were sizable, too. A preliminary evaluation of the discoveries shows that they would replace about half of Norway's production. What's more, NPD says about 20 to 25 exploratory tests will be drilled on Norway's shelf this year, including a modest drilling campaign in the Barents Sea.
While it's obvious that the above UK-Norway figures compare apples with oranges, it sure looks as though Norway's industry is in much finer condition than Britain's.
Geology plays a major role, of course. One side of the boundary line, Norway's, indeed has much more outer continental shelf area than the other, Britain's. Geoscientists of all stripes probably can come up with myriad scientific reasons for why Norway continues to record successes, even in their southern North Sea area, while Britain is moaning about its drawbacks. Plus, the UK's oil and gas search is older by a decade or so than Norway's, so resource depletion also enters the picture.
And then there are the two countries' divergent currency fluctuations with regard to the U.S. dollar, their different industrial bases, offshore leasing regimes, tax policies, populations, numbers of vehicles, and so forth almost ad infinitum.
But what about attitude? And expectation? And preparation? Surely, the wide-ranging optimism these days in Norway about the future of its oil and gas industry--particularly gas--must be making a telling effect, mustn't it?
The answer, most likely, is yes, but for those and many other reasons--far too many, in fact, to discuss here. However, consider just one: Norway's early commitment to improved oil recovery (IOR), which can be described roughly as methods and potential methods for improving the oil recovery factor through specific measures in clearly defined reservoirs.
One of NPD's major tasks since it was created in 1972 (along with both the Ministry of Industry's oil and mining department and Statoil) to regulate offshore operations has been to ensure that the country's petroleum resources are used correctly and that new technologies and recovery strategies are sought wherever possible to wrest as much oil from shelf reservoirs as possible.
Through the ensuing years the NPD, with willing cooperation from all Norwegian industry players, has invested considerable effort to identify new ways to further IOR in all fields. Their current goal is to achieve, eventually, at least 50 percent recovery of the oil and 75 percent of the gas beneath Norway's shelf by taking advantage of long-term IOR technology development.
In 1996, the last time they made such a formal accounting, NPD estimated Norway's average recovery factor for shelf oil fields was 41 percent, an increase of 7 percent from the 1991 average. As those familiar with countless oil fields in the U.S. and elsewhere know, a 41 percent average recovery factor is exceptional. But 50 percent is monumental.
Of course, recovery in many older Norwegian fields has risen significantly over the years through the benefits offered by new drilling technology, more detailed reservoir simulation and description, and updated production methods. A number of fields--such as Ekofisk, for example--have doubled and redoubled in size since discovery, thanks to technology advances. Time marches on, as does conventional technology. The introduction of both horizontal and multilateral drilling to North Sea reservoir development is an apt example, as was the drilling of water injection wells as part of development drilling programs, starting back in the 1970s. Water flooding and polymer-assisted water injection came early to North Sea reservoirs to improve recovery factors in many fields on both sides of the UK/Norwegian boundary.
However, it's been Norwegian government petroleum policy since the early 1980s to encourage the trial use by operators of specific IOR and enhanced oil recovery (EOR) technologies wherever applicable and whenever they would not interfere with primary or secondary (water flood-based) recovery. Sometimes with government incentives and sometimes not, most operators in Norway have conducted one or more such trials.
But successful trials have resulted in application of field-wide commercial IOR/EOR programs. Included among these are natural gas reinjection and water-alternating-gas (WAG) injection, both of which have been effective in some reservoirs, including those at Statfjord, Oseberg, and Ekofisk, among others. At Statfjord, recovery from separate formations has been improved by pressure maintenance supported by produced gas reinjection. In recent years, combinations of both straight water and WAG injection in different formations of the same field also are delivering positive results.
Safe to say, both Norway's industry regulators and the operators they regulate recognized the benefits of the "total well" concept--coordinating field development over the life of the well, from initial seismic to final abandonment--years before it became popular elsewhere.
This is not to say that regulators and operators on the UK shelf don't work together in a similar manner with regard to application of IOR/EOR technology. It's just that the Norwegian model was created early in that country's offshore petroleum history, whereas the UK industry began during the days when the first sign of production decline might have resulted in early abandonment of wells and even entire fields.
It's illustrative of Norway's approach to improved recovery that the NPD in 1998 established an annual "IOR Award" to acknowledge creativity, steadfastness, and the willingness to take risks in applying IOR methods and technology on the Norwegian shelf. The award was presented to either companies or individuals for the first four years. Earlier this month, NPD honored both BP and its Valhall field unit with the 2003 award for their project to initiate a 4-D, "life-of-field" seismic system at Valhall. Discovered in 1969 but not produced until 1982, BP originally estimated Valhall's recoverable reserves at 247 million barrels of oil equivalent (boe). Today, thanks to IOR technology, the field--with recent commissioning of two multi-well satellites--holds estimated recoverable reserves of 578 million boe.
But for 2002, there were no award ceremonies. "No worthy candidate was identified," NPD commented succinctly.
An award with such high standards: That's an award to be coveted.
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