North Sea Oil and Scotland's Economic Prospects

T. M. Lewis, I. H. McNicoll

• Publisher: Taylor & Francis
• Year: 2017
• eBook ISBN: 9781351392341
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

This book, originally published in 1978 concentrates on the structure and growth of the North Sea oil industry in Scotland. Drawing on relevant areas of economic theory, it examines the structure of the offshore Scottish oil industry, the employment generated by the industry, technological change created by oil and its impact on rural areas of the Highlands. For each subject discussed future developments are discussed which remain as pertinent today as when the book was first published, particularly given the issues surrounding Scotland's economic in relation to possible Scottish independence.

1 THE STRUCTURE OF THE OFFSHORE OIL INDUSTRY

As the title suggests, we are concerned here with the structure of the offshore oil industry, and emphasise that within this definition we include the operations of the oil companies themselves as well as their contractors, the oilfield equipment manufacturers and the service companies. The structure of the offshore oil industry is characterised by the temporal nature of the development of an offshore oilfield, and hence this analysis will follow a similar format. Briefly, the phases in the development of an offshore oilfield can be grouped under three major headings, which are exploration, fabrication and production. Obviously with a reasonably mature industry, such as that in the North Sea, these various phases will be operating simultaneously for different fields but this does not affect the usefulness of the breakdown for the purposes of analysis. It is possible to quickly list the activities associated with each phase, as can be seen in Table 1.1.

Here we are considering exploration to cover all activities up to and including the drilling to prove flow rates, etc., which establish whether or not the field is commercial. The fabrication phase then covers the period up until the completion of the installation of the platform. Any further activities, including all downstream refining and processing, are included in the production phase. In practice the phases are not as clearly separated as they appear here: for example the Ninian field, which requires three platforms, has one in the production phase and two at different stages in the fabrication phase.

Table 1.1 Phases of Offshore Activities

Exploration	Fabrication	Production
Surveying	Field character assessment	Production drilling
Analysis	Platform design	Transportation system installed
Exploration drilling	Construct onshore facilities
Assessment	Construct offshore platform	Offshore treatment
Field delineation	Deliver platform	Loading and delivery
Field proving drilling	Establish platform (piles, etc.)	Refining

Clearly we cannot here go into a detailed ‘head count’ of all the resources required at each stage, both because of the variability between requirements for each field, and because of the vast range of equipment necessary. However we can generalise to an extent, and list some of the major requirements at each stage in a development.

Exploration Phase

1. Marine Surveys

The marine survey and interpretation account for roughly 3.6 per cent of the cost of drilling a typical exploration well (see Appendix I), and provided a market worth about £14 million in 1972¹ when twelve vessels were operating. This market will have grown slightly as fifteen vessels are now operating and are expected to be required until 1981 at least.²

The major part of the survey work is made up of seismic studies and the associated geological and geophysical interpretations. Most of these studies nowadays are carried out by the survey vessels at sea being connected to a data handling computer terminal ashore, which can accommodate the results from about five vessels. As a guide, the personnel requirements for this survey work are as shown in Table 1.2.

This survey market is a hotly competitive business with extra services being frequently introduced, and the advantage lying with the large operators who can afford to operate highly sophisticated data processing equipment. The competitive technological environment has resulted in a number of important advances both in the processes involved in the seismic shock generation and in the techniques of data collection.

The vessels required for the survey work are usually termed either ‘survey ships’ or ‘seismic ships’, and although some are purpose built, they are more normally conversions of small passenger vessels or stern trawlers. ‘In most cases, such vessels are leased or chartered to geophysical contractors by marine companies.’⁴ The general equipment of these vessels would not vary markedly from normal nor would the requirements of the ship’s crew be abnormal. The only significant ‘high technology’ equipment associated with this work are the data gathering, transmitting and rationalising units. The major change has been the improvement in the data handling equipment which has enabled different data generation techniques to be developed. There have already been some benefits reaped from this oil-related work in that these offshore techniques have been successfully adapted to onshore seismic exploration work.⁵

Table 1.2 Typical Personnel Requirements in Survey Phase³

On the vessel	Onshore
Crew of between 6 and 14	7 geophysicists
11 geophysicists	3 maintenance engineers
	4 punch-card operators

The other vessels which are required in the initial exploration phase are those for hydrographic surveys and for navigation. The ships used for both of these are again normally conversions of other vessels, and it tends to be supply vessels, tugs, inspection ships or trawlers with good sea-keeping qualities that are used. However, the rate of technological progress is such that the navigation vessels are already being edged out of the market by newer technology such as satellite navigation, and these new navigational systems are now being installed on rigs and platforms where they can operate accurately and independently of other vessels or shore stations. Whilst the North Sea requirements acted as a major stimulus to the development of this system it was a known and technically proven system before then. The availability of a satellite and the technical competence to navigate from it is unlikely to provide any spin-off benefits to industrial concerns in Scotland.

The survey work on a typical block in the North Sea will cost something in the region of £66,000 to £69,000, with a further £16,000 or so required in detailed work before exploration drilling can take place (see Appendix I). Whilst these surveys indicate much about the geological formations and hence help in the identification of possible structural oilfield sites, they do not help in the detection of oilfields contained in stratigraphic features. These fields can only really be detected by high-risk exploration drilling at present, which has a much higher failure:success ratio. Hence, unless new technological developments can improve the survey findings it seems likely that the number of exploratory wells drilled will have to increase significantly in order to maintain the rate of discovery of new oil, particularly as many of the more promising structures have already been explored.

2. Exploration Drilling

Once the survey work has been completed, the exploration work itself gets under way. Most offshore drilling is undertaken by drilling contractors, with only a limited amount of drilling being done directly by the oil companies themselves. Essentially there is little difference in the technique of drilling offshore compared with drilling onshore. The environments are very different, but then there are also great differences between drilling onshore in the middle of an equatorial desert and onshore in the Arctic Circle. Clearly then the most important difference is the need to provide a base at sea on which the derrick can be established and which can provide a habitable environment for the operators of the derrick. The three most common means of providing this base are the jack-up rig, the semi-submersible rig and the drill ship.

The jack-up rig is a platform, with four or more legs, which is floated into position, and then the legs are lowered to the sea-bed and the platform is jacked up to be clear of the waves. These jack-ups are not practical where water depths exceed 300 feet (90 metres) or so.

In water of greater depth, ‘semi-submersible’ rigs are used. These consist of a platform supported by three or more tubular legs, at the bottom of which are hollow pontoons linking one leg to another. During drilling, the pontoons are ballasted so that the rig platform is maintained above the waves whilst the ballasted pontoons provide greater stability. At each leg there are also large winches which raise or lower two 30-ton anchors. These anchors are deposited on the sea-bed some distance from the rig, during drilling, so that the anchors and their chains act to keep the platform in place. On completion of a well, these anchors are drawn up, and the pontoons pumped full of air, to displace the ballast, so that the rig rises up in the water and can be more easily moved to its next assignment. These rigs can operate in most types of mild weather, and in the latest versions they have their own propulsion so that they can move themselves from site to site. With the cost of running a rig like this working out at around £31,000 per day (see Appendix I) any time lost through bad weather or other causes can be very expensive.

For deep waters, i.e. over about 800 feet (240 metres), drill ships are normally used. These are basically a ship’s hull with a derrick located either in the centre of the ship or over one of the sides. During drilling the ships are kept in position by a number of anchors over the bow and stern, and a system of propellers controlled by a computer. This system provides for ‘dynamic positioning’ of the ship to counter horizontal movement, and vertical movement is also countered by a system of hydraulic compensators. These systems help to keep the deck level so that drilling can proceed during a range of sea conditions.

The rig operator usually owns the rig, and is essentially responsible for the day-to-day running of the rig, including provision of consumables both in terms of rig equipment and catering. The exploration company hires the expertise of the rig operator, the crew and the rig, and has to pay for all consumable items used during the drilling of a well. The exploration company will also keep a small staff on the rig at all times whilst the rig is working for that company, which enables them to control and supervise the work and costs of the operator. The rigs also usually include accommodation for a diving contractor, whose services will generally be subcontracted to the exploration company. The diving contractor generally provides a team of six divers and all necessary equipment, from suits through to diving bells and decompression chambers.

In all, then, a semi-submersible drilling rig would require a crew of between 50 and 60 men, which would include most of the personnel listed in Table 1.3.

Similarly, one can briefly itemise the major equipment on a typical semi-submersible, and these would be as shown in Table 1.4. The items mentioned do not comprise an exhaustive listing, but do indicate the range of requirements of a typical rig. This list of equipment will prove useful when we come to examine the industrial implications of the offshore oil business on the economy of Scotland.

Table 1.3⁶ Typical Personnel Requirements on Drilling Rig

Rig crew	Specialist crews
2 tool pushers	6 divers
1 barge engineer	2 geologists
2 control room operators	2 sample catchers
4 drillers	1 consulting geologist
2 derrick men	1 mud engineer
6 floormen	3 marine officers
2 motormen
2 electricians
2 crane operators
8 roustabouts
1 welder
1 subsea mechanic
1 radio operator
6–12 galley staff

In March 1977 there were 23 rigs operating in the UK sector of the North Sea, out of a total of 45 in all sectors. Of the total of 45, 8 rigs were built in the UK, but it is important to note that all of these are of the jack-up variety. Due to the restrictions on the operating depths of these rigs, only one out of the 23 rigs working in the UK sector is a British made jack-up rig, the rest are all semi-submersibles.

There are technical reasons why UK manufacturers have not broken into the semi-submersible market, and these are mainly concerned with the characteristics of the manufacturers (usually shipbuilders) and the construction requirements of the different rig ...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Abbreviations
• List of Tables
• Maps
• Preface
• 1. The Structure of the Offshore Oil Industry
• 2. The Impact of Oil Developments on Scottish Infrastructure
• 3. Employment Effects of North Sea Oil
• 4. North Sea Oil and Scottish Technology
• 5. North Sea Oil and the Impact on Rural Communities
• 6. The Economic Prospects for Scotland
• Appendices
• References
• Index