Should We Continue To Explore in the North Sea?
Authors: Hoyle R.S. 
Published: December 2007

The North Sea environment is one of the most hostile in the world and yet has, in the past (and future?), offered some of the most attractive geological prospects available outside of OPEC and Russia. Questions confronting many explorers today are addressed towards the issues of "just how good is the North Sea"?

Obviously, certain areas have reached an exploration maturity cycle that downgrades the potential for huge discoveries. Other areas are potential for huge discoveries. Other areas are virtually untouched, holding huge potential –– yet in deeper water and more severe environments. The bottom line seems to be an economics issue — can smaller structures in mature areas afford attractive economic returns? Can even large reserves prove economic in the more hostile, yet invitingly prove economic in the more hostile, yet invitingly unexplored, territories?

This paper attempts to pull together many of the recently published information items on the North Sea, in order to get an overall perspective that will address some of the pros and cons of exploring with these uncertainties. Operating environment, costs, oil reserve potential, contract and tax issues for the North Sea are presented and compared against other proven, producing areas such as Indonesia and Egypt. Project economic issues and trends for the North Sea are discussed for existing as well as new, yet-to-be-made discoveries, with emphasis on the category of "marginal fields".

Some trends also are examined in the UK, Norway and world energy markets; and extrapolations are made as to how these might affect the national economies of the UK and Norway –– and especially how these factors might influence their perspectives toward economic incentives within the private oil industry sector. Conclusions are drawn concerning 1) the many positive aspects of the North Sea areas and 2) some of the not-so-positive features –– such as the onerous taxation structures and disincentives companies face today in those areas.

Disclaimer

The contents of this paper are the sole responsibility of the author. Opinions and data presented herein may or may not reflect the presented herein may or may not reflect the positions of Conoco Inc., its parent company DuPont positions of Conoco Inc., its parent company DuPont or any of the other Conoco subsidiaries in the UK, Norway, Indonesia or Egypt.

THE NORTH SEA ENVIRONMENT AND COSTS

Operating Environment

Geographically the North Sea is that body of water roughly described as being between the United Kingdom (UK) and Norway. As shown in Figure 1 there are several countries (or sectors) bordering this highly prolific oil province: the UK, the Netherlands, Germany, Denmark and Norway. And for Norway, even areas of oil industry interest up to the region of the Arctic Circle (in the vicinity of Tromso) are still oftentimes referred to as the North Sea (N62). For this extended definition, the latitude coverage of the North Sea is equivalent to slightly above Seattle, Washington all the way past Prudhoe Bay in Alaska. Prudhoe Bay in Alaska. As shown in Figures 2 through 5, the North Sea has one of the most hostile oil exploration and production environments in the world –– exceeded production environments in the world –– exceeded (in some cases) only by the wind and low temperatures of Canadian and U.S. arctic conditions. However, even then, explorers in those Arctic areas are not confronted with the deep water and extremely large wave heights of the North Sea.

The Southern North Sea region (from slightly below the Ekofisk area, southward) is relatively shallow, with the Central North Sea area having only moderate depths.

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