Oil and Gas Exploration and Exploitation in the North Sea Peter R. Odell Erasmus University, Rotterdam

INTRODUCTION

The North Sea has become the world's most active region of offshore oil and gas developments-with the possible exception of the Gulf of Mexico. Even that is pushed into second place if one takes note of the speed of exploitation, of the degrees of success achieved in terms of the discovery of oil and gas reserves, and of the amount of technological innovation that has been engendered by the exploration and production efforts in the deep water and adverse weather conditions of the North Sea.'I What has happened to date in the North Sea over the period from the first offshore activity there in 1964 depends essentially on the international oil companies, for they provide the dominant element in the exploration for and the production of the province's oil and gas resources. Indeed, they have been given-directly and indirectly-well over 70 percent of all the North Sea acreage allocated2 (including an even higher percentage of the best blocks); they have discovered all the major fields found so far (except two, namely, Brae and Brora) together with most of the minor fields; and they are responsible for almost all the fields in production or under development toward production. This is so in spite of the interest shown in the North Sea both by new oil companies formed with the North Sea specifically in mind and by non-oil companies in Britain and Norway deciding to diversify into a new field of endeavor. Even the rapid growth of state oil companies-particularly the British National Oil Corporation and Norway's Statoil-seems unlikely to diminish very much the role of the international oil companies in determining

1. Descriptions of these conditions can be found in K. Chapman, North Sea Oil and Gas (North Promfret, Vt.: David � Charles, 1976), and I. L. White et al.,North Sea Oil and Gas: A Study Sponsored by the Council on Environrrzental Quality (Norman: University of Oklahoma Press, 1973). 2. In all sectors of the North Sea (see fig. 5), concessions for exploration and/or production are allocated to companies which apply for them. They are not auctioned by the states concerned to the highest bidders. See K. W. Dam, Oil Resources: Who Gets What How? (Chicago: University of Chicago Press, 1976), for a description and analysis of the procedures involved. just how far and how fast the North Sea oil and gas province will be developed. Thus, the motivations of the international oil companies in respect of the North Sea opportunities-together with these companies' responses to the petroleum legislation of the countries surrounding the North Sea-have largely deter- mined the progress toward, and still condition the prospects for, the develop- ment of this major new oil and gas province.

THE RESOURCE BASE

Progress and prospects in the North Sea's oil and gas exploitation, though dependent in the final analysis on the "behavior" of the companies (and of the governments), depend in the first instance on the size and wealth of the resource base. Knowledge of this is, in the initial period of exploration, limited and speculative. Thus hypotheses on the likely occurrence of oil and gas are based largely on geological analogies. The size and complexity of the North Sea basin constituted a major difficulty in the early evaluations. Size, though a simple concept, was consistently underrated such that the North Sea came to be seen as a kind of European backyard in which prospects for exploitation were limited and about which the main concern was that false hopes should not be raised over its potential. However, what has already happened in terms of successful exploration and what remains to be done in this respect (and this adds up to an exploration effort that will be several times the magnitude of that already made) should be seen in the context of a potentially petroliferous North Sea province which is almost exactly the same size as the petroliferous region of the Persian Gulf-a comparison which is illustrated in figure 1. As in the Persian Gulf, where there are many different oil and gas "plays" (i.e., many potentially productive horizons in the underlying geological series), so also with the North Sea where the first decade of exploration has also clearly demon- strated that there are many sorts of potential reservoir rocks which are worthy of investigation. This opens up not only the likelihood of exploration in parts of the province which have, hitherto, not been considered worthwhile, but also the desirability of deeper exploration in areas previously investigated only by shallower wells. Thus, both geographical scale and geological complexities underly the great success to date in the exploration efforts in the North Sea and provide the basis for continuing efforts which should certainly stretch out over the next 25 years. Success to date is pinpointed in table 1, which shows the number of finds of oil and/or gas that had been made in various classes up to the end of 1976. The essential proof of the prolific nature of the basin lies in the fact of over 200 discoveries to date, of which about two-thirds (129) have already been designated as gas or oil and gas fields. Of this number, about 60 percent have had reserve figures declared for them. Moreover, of the 79 fields with declared