This year's Offshore Europe conference was what people in the marketing department call a "branding opportunity." Thousands of informed consumers gathered in one spot eager to be educated on what is new and exciting. So what was the latest product roll out? What is the "new thing" everyone's talking about this year? Why the North Sea? Like fashion and music trends, it appears that everything old is new again.
In the 1960s and 1970s, the North Sea was the offshore oil industry, home to some of the harshest environmental conditions in the world. This area also holds some of the planet's most prolific fields. But like Houston's famed Astrodome, the North Sea has lost its luster over the years, making way for upstarts like the deepwater Gulf of Mexico, Brazil, and West Africa. These areas promise new, exciting, billion-barrel finds, while the North Sea continues to quietly chug along, dependable, if not dramatic.
Talk about being taken for granted. Where would these other regions be without the semisubmersible and other workhorses of the industry developed specifically for the North Sea? There is no better proving ground than the North Sea, with its extreme temperatures, violent waves, and high winds. If a design can stand up to the North Sea, it'll last forever in these other benign environments. And yet operators continue to look elsewhere for their new prospects, mesmerized by the opportunities in the so-called frontier areas.
All that is about to change. The North Sea is coming back, and it's coming back strong. Like the martini and the three-button suit, this "classic" of the oil industry is poised to be all the rage with the young up-and-comers, i.e., independent operators. The marketing blitz is on, and by the time it makes its way across the pond to Houston – look for a special focus at OTC 2004 – people will have a hard time remembering when they weren't excited by the potential of this mature area.
In all seriousness, there are great opportunities for independents to come into this mature region and do what they do best. Much in the same way the majors sold off their on-shelf properties in the Gulf of Mexico to focus on deepwater, these same companies may be eager to sell their going concerns in the North Sea, although many of these properties are far from played out.
The UK government is hot to get some new blood into this region, increase production, and with it their cut of the money it creates. If the deals can be made, it would seem a perfect opportunity for those independents that cut their teeth acquiring and reworking fields in the Gulf of Mexico. Such well-understood technologies as subsea tiebacks, gravel and frac packs, and multilaterals, combined with an inclusive reservoir management strategy could easily increase production from the North Sea and give some small independents their first taste of the big time.
Of course, it goes without saying that to be successful, these new players will have to negotiate carefully with the majors before agreeing on a price. Decades of experience definitely give the current operators an advantage, but modern visualization technology is a great equalizer. If the independents are able to control costs the way they have in the Gulf and stay focused not only on increasing early production, but also on sustaining these properties, this move should be good news for everyone involved. The majors raise a good amount of capital, at the same time freeing up the people and resources now based in the North Sea to go elephant hunting in the frontier. The independents have the chance to work on projects larger than anything they would hope to acquire elsewhere, and the UK government and economy in general get a shot in the arm from the increase in both activity and production.
The only real questions seems to be:
- Are the majors serious about selling any of these properties? The Forties deal not withstanding, there has been much talk, but few announcements to date
- If the properties do become available, will the independents bite?
The North Sea is a long way from the Gulf of Mexico in many ways. The environmental and regulatory differences alone make this a whole new game. Will the experience and strategic advantages these companies enjoyed in the Gulf translate to the North Sea?
William Furlow
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