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The Sea of Lost Opportunity

HANDBOOK OF PETROLEUM EXPLORATION

AND PRODUCTION

7

Series Editor

JOHN CUBITT

Previous volumes in the series:

Volume 1 Operational Aspects of Oil and Gas Well Testing

Volume 2 Statistics for Petroleum Engineers and Geoscientists

Volume 3 Well Test Analysis

Volume 4 A Generalized Approach to Primary Hydrocarbon

Recovery of Petroleum Exploration and Production

Volume 5 Deep-Water Processes and Facies Models: Implications for

Sandstone Petroleum Reservoirs

Volume 6 Stratigraphic Reservoir Characterization for Petroleum

Geologists, Geophysicists, and Engineers

HANDBOOK OF PETROLEUM EXPLORATION AND PRODUCTION, 7

The Sea of Lost

Opportunity

North Sea Oil and Gas, British Industry

and the Offshore Supplies Office

Norman J. Smith

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11 12 13 14 10 9 8 7 6 5 4 3 2 1

For my wife and family, who saw so little of me for so many years.

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Contents

List of Tables ix

List of Charts x

List of Figures xi

Acknowledgements xiii

Preface xv

1. In Europe’s Sick Bay: Britain before North Sea Oil 1

1.1 The British Balance of Payments Problem 2

1.2 Oil and the Balance of Payments 4

1.3 British Economic and Industrial Decline 10

1.4 An Insufficient Inheritance: The British Oilfield

Supply Industry 19

2. The Genesis of the North Sea Oil and Gas Industry 23

2.1 The Move to the North Sea 24

2.2 The Technological ‘State of the Art’ 26

2.3 The United Kingdom Position 36

2.4 Potential European Competitors 50

2.5 Perceptions of the UKCS Hydrocarbon

Resource Base 53

2.6 The New Technical Challenges of the North Sea 56

3. Motivations and Constraints 61

3.1 The Exploration and Production Companies 61

3.2 The British Government 69

3.3 British Industry 80

3.4 Finance 85

4. Before OSO: Offshore Supplies 1963–1972 93

4.1 Oil Company Attitudes to British Suppliers 94

4.2 Government Attitudes to British Suppliers 97

4.3 The IMEG Report 98

4.4 An Assessment of the Period 100

vii

5. OSO’s Formative Years 1973–1980 109

5.1 The Course of Demand 110

5.2 OSO Operations in Context 111

5.3 OSO and the Machinery of Government 114

5.4 Some Key OSO Issues of the Period 117

5.5 The Supply Industry 141

6. OSO’s Long March into History 1981–1993 169

6.1 The Course of Demand 173

6.2 OSO Operations in Context 174

6.3 Some Key OSO Issues of the Period 175

6.4 The Supply Industry 186

7. Assessing OSO 203

7.1 Third-Party Commentary 203

7.2 One Insider’s View 208

7.3 OSO’s Statistics 212

7.4 A Summing-Up 215

8. Case Studies and Expert Testimony 219

8.1 Market Segment Case Studies 219

8.2 Corporate Case Studies 225

8.3 Expert Testimony 238

9. Looking Back on a 30-Year Journey 247

9.1 Some Propositions 247

9.2 Some Conclusions 253

9.3 Could it have been otherwise? 256

10. Postscript 265

10.1 The UKCS Oil and Gas Industry and its Supply Sector today 266

10.2 What of the Future? 274

Source Materials 283

Glossary 293

Index 301

viii Contents

List of Tables

CHAPTER 1

Table 1.1 UK Oil Trade 1964–1974 (Money of the Day) 5

Table 1.2 Summary of Potential Balance of Payments Effects

from North Sea Oil (or Oil and Gas) for 1980 (£ billion) 7

Table 1.3 Excess Costs and Programme Delays in Major UK Projects

(Late 1950s to Late 1960s) 15

Table 1.4 Attributed Causes of Delay in Construction of Large

Industrial Sites 16

CHAPTER 2

Table 2.1 Some Key Offshore Innovations 1949–1963 34

CHAPTER 3

Table 3.1 Important Offshore Legislation 1964–1978 68

Table 3.2 Relative Weight of Factors Influencing Government Policy 79

CHAPTER 5

Table 5.1 UK–U.S. Joint Ventures with Probable OSO Involvement 149

Table 5.2 Some Early British Offshore Champions and Entrepreneurs 154

Table 5.3 Companies Founded by Former Vickers Personnel During

the 1970s and 1980s 168

CHAPTER 7

Table 7.1 Policies Employed in the UK, Norway, and France and

Their Beneficiaries 206

CHAPTER 8

Table 8.1 Public Sector Group’s View of the Main Constraints Faced

by British New Entrants to the Offshore Service

and Supply Sector 240

Table 8.2 Private Sector Group’s View of the Main Constraints

Faced by British New Entrants to the Offshore Service

and Supply Sector 241

Table 8.3 Opinions on British Government Support Policies for

the Offshore Industry 242

CHAPTER 10

Table 10.1 Some Post-1998 Initiatives 269

Table 10.2 Recent Foreign Takeovers of British Private Firms with

Proprietary Technology and/or Strategic Market Positions 275

ix

List of Charts

CHAPTER 4

Chart 4.1 UKCS Expenditure (2008 prices) 1970–1993 94

Chart 4.2 UKCS Drilling Activity 1964–1993 102

CHAPTER 6

Chart 6.1 Median Rates of Return on Capital Investment (per cent)

1985–1989 192

Chart 6.2 Profitability Trends 1985–1990 193

CHAPTER 7

Chart 7.1 UK Content Comparison 215

CHAPTER 10

Chart 10.1 UKCS Expenditure (2008 prices) 1994–2008 267

Chart 10.2 UKCS Drilling Activity 1994–2009 268

x

List of Figures

CHAPTER 2

Figure 2.1 ADMA’s Das Island Base 39

Figure 2.2 Early ADMA well-head platform installation 41

CHAPTER 3

Figure 3.1 The jack-up drilling rig Sea Gem 63

Figure 3.2 Shell’s Leman Field Alpha Complex 65

CHAPTER 4

Figure 4.1 The semi-submersible drilling rig Sea Quest 96

Figure 4.2 West Sole gas field 96

Figure 4.3 Forties oil field Alpha production platform 106

CHAPTER 5

Figure 5.1 Central Cormorant UMC at Rotterdam 132

Figure 5.2 Hutton TLP in the Moray Firth 133

Figure 5.3 End of an Era: Thistle jacket at Laing Offshore Yard 144

Figure 5.4 The Viking Piper Pipelay Barge 151

Figure 5.5 ‘Jim’ atmospheric diving suit 158

Figure 5.6 Stadive MSV 161

Figure 5.7 Pisces 2 VOL-operated Canadian-built submersible 163

Figure 5.8 Slingsby-built LR class submersible 167

CHAPTER 8

Figure 8.1 Consub 2 ROV 226

xi

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Acknowledgements

This book could never have been written without the help, assistance, and

encouragement of many people. During the research phase, Professor Alex Kemp

and Dr. Richard Perren of the University of Aberdeen gave unstinting help and

advice, while Professor Roger Wootton of the City University was generous with

ideas and sources. Mr. John Westwood of Douglas–Westwood Associates kindly

read the draft.

I must also thank the libraries to which I paid so many visits, in particular, the

Queen Mother at the University of Aberdeen, the Templeman at the University of

Kent, the London Business School, the Energy Institute, and the British Library. In

all cases, the staff gave freely of their time and expertise. The same is also true of

the staff at The National Archives, the BP Archive, Lloyds Register, and UKOOA

(now Oil and Gas UK) where much of my research was conducted. Many veterans

of the North Sea oil and gas industry, mainly now in retirement, contributed to the

work. Without their knowledge and opinions, so freely given, the content would

have been very much the poorer.

Finally, I must thank my wife, Valerie, for her self-sacrifice in allowing this

endeavour to over-shadow the early years of our retirement and my daughter,

Gail, and her husband, Allan Graham, for helping when my IT skills proved

inadequate for the task.

xiii

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