Norway's Oil Saga

Since finding oil in 1969, Norway has transformed itself from one of Europe's poorest countries to one of the richest in the world. But wealth is not the sole measure of any country. More important is "quality of life".

 When the United Nations declared that Norway had the No. 1 quality of life in the world in 2001, it was in recognition of three decades of wise production and financial policies. Norway had transformed its lucky oil strike into long-term good fortune for its 4.4 million citizens and for the many countries around the world to which they contribute development aid.

 

Norway's story may contain a lesson or two for new members of the growing fraternity of oil-producing nations. In 1965, when drilling began in Norwegian waters, the chief geologist at British Petroleum was so pessimistic that he vowed to drink any oil that came up. For the next 4 years he seemed quite the prophet as oil companies spudded dry hole after dry hole – 30 unproduceable wells in total. By 1969 Phillips Petroleum, for one, was on the verge of giving up. But its executives in Oklahoma approved one last well. That's when Phillips's Ocean Viking rig discovered the Ekofisk field - an elephantine find that put the North Sea on the industrial map and altered forever the global energy balance.

 

 The development of Norway's early fields - and they were all big - coincided with the 1973 Egyptian-Israeli war and OPEC's subsequent embargo of the United States and other western countries. With the price of oil at unheard-of levels, Mobil in 1974 announced that the Statfjord field contained the greatest concentration of recoverable oil ever discovered in Europe. The figure was eventually put at 4.1 billion barrels, a lot even by Middle Eastern standards. But the North Sea was a cold and blustery body of water, and deep by the standards of the 1970s. Its seabed was cut by vast trenches that hindered pipeline construction. Many people doubted the newly found oil could be exploited profitably. But the oil companies found courage enough to invest. So did Norwegian technology companies that lined up to take part in "the oil adventure" as contractors and suppliers. "Altogether, the development of the North Sea was one of the greatest investment projects in the world, made all the more expensive by rapidly inflating costs," recalls oil historian Daniel Yergin in his Pulitzer Prize-winning book, The Prize. "It was also a technological marvel of the first order. And it was carried out in an amazingly expeditious manner."

 

 Turning Point

 Norway's concrete gravity-base platforms were the largest petroleum facilities ever imagined. Mobil began producing at Statfjord in 1979. Seven years later, Gullfaks was on line. It was the first field operated by Statoil, the newly formed state oil company whose 50 per cent stake in all early licenses gave it access to the technology and administrative savvy of its international partners. In 1988, in the Oseberg field, Norsk Hydro joined the ranks of operators. Norway's "Think Big" era culminated in 1995 with the tow-out of the colossal Troll gas platform. As high as the Sears Tower in Chicago, it was the world's largest offshore petroleum structure, with 40 wells radiating out from the base. The New York Times called Troll "a turning point for Norwegian energy".

 

With Norway's big oil fields in slow decline, it was predicted that gas would eventually eclipse oil as the country's most important export. By the mid-1990s experts believed that most of Norway's giant oil fields had been found. Oil companies and contractors adjusted their technologies to make the most of smaller fields in deeper waters. They embraced floating installations, including the first FPSOs, as well as extensive subsea production and control equipment. The new fields had names inspired by Norse mythology, like Norne and Åsgard. Åsgard, which came on line for oil in 1999 and for gas in 2000, is the world's largest and most technologically advanced subsea development, with 51 widely dispersed wells. Start-up problems were resolved professionally, making it a prime example of how Norwegian oil companies and contractors use their home waters as a laboratory to perfect new technology that eventually finds its way around the world. Along with Norne, Åsgard is expected to be one of Statoil's most profitable investments.

 

 Throughout the 1990s, Norway's first-generation platforms sprouted the longest and most precisely aimed horizontal wells in the world, thanks to updated drilling equipment and reservoir-description technology. Projected recovery rates jumped to 70 per cent in some fields. Old developments gained high-tech satellite installations on the sea floor that were tied back over vast distances to original infrastructure. Today, more than 30 Norwegian fields are in production or development, including six with FPSOs. Despite its maturation, Norway's continental shelf will turbocharge Norway's economy for another half-century or more. The petroleum-rich Barents Sea has not even been tapped yet.

 

 Already, the state is salting away surplus oil proceeds in an investment fund for future generations. Its value is expected to reach USD 100 billion by 2003. But it takes constant change to maintain industrial competitiveness. Mergers, acquisitions and strategic realignments keep the playing field lively. But the most important developments in 2001 emanated from the Norwegian parliament. These included partial privatization of Statoil; sale of a portion of the state's directly owned petroleum resources; establishment of Petoro to manage the state's remaining resources; and dissolution of the committee that once negotiated long-term gas contracts on the collective behalf of Norwegian-shelf producers.

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