OFFSHORE EUROPE

Jeremy Beckman
London

The route of the Europipe II trunk line from Norway to the German north coast. [18,631 bytes]
Lasmo's "Tree" fields in UK block 16/12a. [43,315 bytes]

Tax stalemate gets staler

Clarification of proposed changes to the UK petroleum tax regime were deferred yet again last month as Parliament closed for the summer recess. Predictably, the postponement irritated Britain's Offshore Contractors' Association (OCA). Its members are having to look to Latin America and Africa for work while substantial UK field developments are frozen, pending the outcome of the government's review.

Equally predictably, the government promised to maintain consultation with all parties affected - in most matters of policy, it likes to appear attentive before declaring that its own proposals are the best way forward.

OCA's statement echoed the general view outside the government that "there is no leeway to raise further taxes from the North Sea without causing significant damage to the future viability of the industry. Any attempt to do so will have a knock-on effect in the entire UK economy and more particularly in areas of the country with heavy concentration of oil and gas-related jobs."

That bleak picture was reinforced by June UKCS statistics issued by the Royal Bank of Scotland oil index. These showed that oil output, despite being 11.6% higher than in June 1997, realized the lowest average daily revenue - $28.3 million - since June 1991. In real terms, that return is close to levels last seen in the 1960s, the Bank claimed.

While oil prices remain in the doldrums, any revenue boost will have to come from increased production. That may well be the case, following startup in late July of the Schiehallion development west of Shetland and also the ETAP multi-field complex in the Central North Sea. Both flowed initially at 30,000 b/d, but production should soar steadily, particularly at ETAP once more of its constituent fields are brought onstream.

Another newly commissioned project is Chevron/Conoco's development Britannia, which started exporting gas last month via a new 186-km pipeline to St. Fergus in east Scotland. Gas is being processed at the SAGE terminal operated by Mobil, which underwent an $80 million capacity expansion to handle Britannia's supplies. The terminal can now manage 1,895 MMcf/d from various North Sea fields.

Despite the uncertainties facing UK fabricators, a couple of mid-sized projects are likely to move ahead shortly, such as Texaco's Captain expansion and British Gas' Easington Catchment Area development in the Southern North Sea.

In the longer term, some activity may result from the UK's 18th Offshore Licensing Round, bids for which were due in by September 11.

Stinger damage delays trunklines

Gremlins seem to be supervising this season's Norwegian sector pipelaying. Earlier, a storm-damaged stinger forced laybarge LB 200 to pull out of the Ekofisk bypass line job. More recently, the state-of-the-art Solitaire dropped a section of the Europipe II gas trunkline, again roughing up a stinger.

Only 1.5 km of the 42-in. line had been laid at that point. Work was already three months behind schedule, owing to delays in commissioning of the Solitaire. Statoil insists that the program can be brought back on track, but that means having the 625-km line in position on the seabed by May 1999, in readiness for testing and subsequent commercial operation the following October.

Europipe II's southern section is being laid first, from a point in the Danish North Sea to Dornum on the German north coast. Con currently, a direct 49-km link is being laid overland from Dornum to Etzel, which will feed Europipe's 16 bcm/yr into the Central European trunkline system. Should progress offshore continue to fall behind, Statoil might revert to ETPM for help. The latter's LB 200 is working on the 719-km Åsgard transport line off mid-Norway, through to spring 1999, but may have an opening between that and its next scheduled assignment in 2000 - the 75-km, 16-in gas export line from Norske Shell's Draugen Field - due to feed into the Åsgard system via a tee.

Much farther north, arch ae ological investigations are underway along the pro posed 150-km pipeline route between Statoil's Snoehvit Field and Melkoya in Finn mark county. Similar studies are being mounted at the proposed site of the associated gas liquefaction plant.

Drilling services resist oil slump

Drilling and completion services off Northwest Europe have grown by around 10%/yr in value terms over the past decade. This is one of the conclusions of a new report on downhole equipment and services by Smith Rea Energy Analysts of Canterbury, UK, which estimated the 1997 market value at over $1.6 billion.

The report lists various trends, including:

One dominant contractor in integrated service teams supplying a complete package of downhole equipment
Increased onus on contractors or drilling service groups to plan and design wells while oil companies downsize their own technical resources
More independent subcontractors being sourc ed for downhole technology as the main contractors themselves become larger corporations
Difficulties in field-testing new equipment, against a backdrop of high demand for field-proven, innovative technology.

Despite the low oil price and current tax regime uncertainties, Smith Rea believes the increase in the downhole service market can be maintained for the next two years at least - particularly for those willing and able to invest in new technologies.

Larch onstream within 10 months

Production from Lasmo's Larch Field in UK block 16/12a started in July, 10 months after the Santa Fe 135 began development drilling. This is one of the numerous "Trees" discoveries in a corridor between Marathon's Brae complex to the north and Agip's Tiffany to the south. Larch was tied back to the Brae A platform, which also processes fluids from the Birch subsea satellite. In addition, Brae A is supplying low sulfate water for injection purposes to Larch.

The Larch producer well was designed to test three potential reservoir sections. The well was drilled horizontally through the hard Jurassic Brae conglomerate, reaching a final depth of 18,422 ft with a 3,772 ft section through the reservoir - believed to be one of the longest sections achieved in this part of the North Sea. It was perforated using 2-in. coiled tubing over an interval of 1,020 ft in three runs.

Further well tests are planned in the Greater Larch area, with good potential predicted from several undrilled prospects, in addition to the undeveloped Pine and Elm discoveries. Elm may be tied back shortly to the Tiffany platform.