In the beginning was …
Seismic data
Geophysical and geological maps must be created in order to form a picture of the chances for finding oil and gas in a region. These determine whether seismic surveys should be conducted.
In addition to studies and measurements of the Earth’s crust, geophysical surveys cover determination of the local gravitational and magnetic fields.
Seismic surveying is the most important method used in geophysical investigations. Exploring for oil in this way involves transmitting powerful sound waves into the sub-surface and recording the echoes which bounce off the various strata.
That makes it possible to construct a picture of conditions beneath the Earth’s surface. Although seismic surveys can identify reservoirs, they cannot determine whether these are aquifers (water-filled) or contain hydrocarbons.
All information about how long the sound waves take to travel through the Earth’s crust is stored for later processing – done today by powerful computers.
During the 1960s and 1970s, however, computer technology had not advanced that far, and seismic interpretation was conducted by entering coloured lines on print-outs of the recorded data.
Seismic shooting is the oil industry’s most important tool for identifying possible petroleum deposits many thousands of metres beneath the Earth’s surface.
The actual work involved in such surveys is very considerable, and the consequences of positive signals are so great that such activity is defined as petroleum-related in Norway’s Petroleum Act.
International companies were conducting seismic surveys in the Norwegian sector of the North Sea as early as the summer of 1963. At that time, national jurisdiction had not been established beyond the fisheries limit of 20 nautical miles from the coast.
Norway declared its sovereignty over the continental shelf in that year, and thereby acquired authority over all prospecting for and exploitation of undersea natural resources. But it was 1965 before the UK, Norway and Denmark agreed their mutual boundaries in these waters.
Stavanger Port Authority records reveal at least 140 calls by 40 or so vessels participating in the race to find “black gold” in 19963-65. America’s Sonic was the first recorded seismic survey ship to arrive. It took on fuel in Stavanger on 8 August 1963.
American Overseas Petroleum Ltd received the first official permit from the Norwegian government to undertake seismic surveying in national waters on 7 June 1963.
Represented in Norway by Norsk Caltex Oil A/S, this company had applied to the Ministry of Industry but secured the award from the Ministry of Foreign Affairs over the signature of E F Ofstad.
On 5 September, this company notified the Norwegian government that it intended to begin surveying an area which subsequently turned out to embrace Valhall.
The contract for this work was awarded to Western Geophysical Company of America, which conducted the survey with Cynthia Walker and Linda Walker .
This technology was important when petroleum operations began on the Norwegian continental shelf (NCS), and domestic companies rapidly acquired a key role in further developing and adapting it for offshore use.
Norwegian factory trawlers proved very suitable for conversion to seismic vessels and were quickly adapted to this role. The former crew stayed with the ships, providing the geophysicists and engineers with valuable knowledge about handling equipment derived from the fishing fleet.
A clear indication that the Norwegian government was not perhaps entirely familiar with the new technology – or confident that it was – was provided when Norsk Hydro applied on behalf of the Petronord group to conduct seismographic surveys in May 1964.
In addition to a detailed technical explanation, this application contained an appendix with drawings (figure 1) to show the difference between the refraction and reflection methods.
Interpreting data
Generally speaking, three conditions must be met if petroleum reservoirs are to be created.
- A source rock where hydrocarbons can form. Claystone and shale are the commonest source rocks in the North Sea.
- A porous rock which the hydrocarbons can migrate to and accumulate in. Examples of such reservoir rocks include sedimentary deposits such as sand, sandstone and chalk (Valhall).
- A cap rock which overlies the reservoir rock and prevents further migration of the hydrocarbons.
Geologists interpret seismic and well data in an effort to understand the complex structure and formation of the NCS. In order to identify recoverable oil and gas resources, they must map “traps” which may contain hydrocarbons and estimate the possible size of such resources.
Overall seismic surveys were conducted during the early years on the NCS by commercial companies. Since the Norwegian Petroleum Directorate (NPD) was established in 1972, it has been responsible for doing such area studies. Their results are sold to companies wanting to assess opportunities for finding oil or gas.
Such sales also give the government an indication of the strength of interest in various parts of the NCS. In addition to its own assessments, the NPD’s specialists follow up geological interpretations made by the companies.
Applying for a production licence
Over more than five decades of petroleum exploration, licensing policy has been the Norwegian government’s most important instrument to controlling the level of offshore activity and ensuring optimum management of hydrocarbons on the NCS.
The licensing system represents a key element in the operating parameters governing Norway’s petroleum industry – in other words, the terms and conditions licensees on the NCS must comply with.
A division of the NCS into rectangular blocks with their short sides facing north was carried out in 1964 on the same pattern adopted by the other North Sea countries.
Each Norwegian block covered 500 square kilometres, about twice the size of its counterparts in the UK sector, but the international oil companies had wanted them to be even bigger.
They argued that an unknown geological region like the NCS should put large areas on offer in order to attract sufficient interest but failed to win full acceptance for this view.
The first licensing regulations for the NCS were established by royal decree on 9 April 1965. Later the same month, 278 blocks were put on offer. Block 2/8, embracing much of Valhall, was awarded as production licence 006 on 17 August 1965.
This initial licensing round is also by far largest in Norwegian oil history in terms of both the number of blocks offered and the total acreage involved.
The second round was announced on 21 May 1968 and extended over several years. Fourteen of the 68 blocks put on offer were awarded in all. One of these was 2/11, containing the rest of Valhall as well as Hod, which was handed out as PL 033 on 30 May 1969.
Today’s system is regulated by the Act of 29 November 1996 no 72 relating to petroleum activities (the Petroleum Act). This specifies that the state owns the undersea petroleum resources on the NCS.
Government permits and licences are required for all phases of petroleum operations, from the award of prospecting and production licences, through seismic surveys and exploration drilling, to plans for development and operation and for cessation of production.
Production licences are normally awarded through advertised licensing rounds. Applications can be made singly or in groups. Details they must contain and the procedure for seeking production licenses are regulated in the Petroleum Act and associated statutory regulations.
Securing an award
Production licences are issued to companies by the Ministry of Petroleum and Energy after a thorough assessment of the applications received.
Awards are made in accordance with published criteria which are unbiased, objective and non-discriminatory, and usually to a group of companies.
One company is appointed operator for the group, responsible for the operational activities covered by the licence. The other licensees are also intended to function as an internal check on the operator’s work.
A licence regulates the rights and duties of the companies in relation to the government. It confers a sole right to conduct prospecting, exploration drilling and production of petroleum in the geographical area covered.
The licensees become the owners of the petroleum produced. Each licence applies in the first instance to an initial period defined as the exploration stage, which can last up to 10 years.
First licences for Valhall
PL 006 was awarded on 17 August 1965 to Amoco, Amerada, Texas Eastern and the Norwegian Oil Consortium (Noco). It covered the three contiguous blocks 2/2, 2/5 and 2/8 as well as the nearby but not adjacent block 3/4.
This acreage added up to 2 279 square kilometres. The one-off area fee to be paid was NOK 1 139 500, or NOK 5 000 per square kilometre.
Chapter 4 specified that “the Licensee has undertaken to carry out a work programme which will be completed in its entirety by 1 September 1971. The following provisions apply to this work programme and its implementation.
“The Licensee will drill four wells with the purpose of finding oil and gas in the licenced areas covered by production licences 004, 005 and 006. At least one well will be drilled in the blocks covered by this licence.”
Chapters 7-10 set stringent requirements for conducting seismic surveys, especially with regard to shipping and aviation activities but very particularly to fishing. These rules related to equipment as well as the use of explosives. Notification and reporting were also covered by separate provisions.
No reserves had been proven in blocks 2/2 or 3/4 up to 2015. A promising reservoir was discovered in block 2/5 in 1970, which was given the name Tor.
This structure extended into block 2/4 and turned out later to be part of the Ekofisk area. It has accordingly been “unitised” – treated as a single unit – with interests divided in accordance with the estimated hydrocarbons in each block. That gave 75 per cent to PL 018 and 25 per cent to PL 006.
The field which was eventually to be given the name Valhall was discovered in 1975 in block 2/8. This reservoir again extended into a neighbouring block, 2/11, which had proved the year before to contain the Hod field. That acreage was awarded to Amoco and its partners in 1969 as part of the second licensing round.
PL 033 was awarded on 30 May 1969 to the same companies, and covered blocks 2/9 and 2/11. For some reason, only 2/11 was geographically defined. That did not prove a problem subsequently, however, since this represented the only acreage where recoverable reserves have been found.
The defined area covered 208 square kilometres, and the area fee was NOK 104 000 – in other words, the same price per square kilometre as four years earlier.
Chapter four specified that “the Licensee has undertaken to carry out a work programme which will be completed in its entirety by 1 September 1971. The following provisions apply to this work programme and its implementation.
“Further seismic surveys will be conducted. Furthermore, [the Licensee] will drill one well in this block with the purpose of finding petroleum. This well will aim to test the base of the Zechstein formation, which is currently assumed to lie at a depth of 12-15 000 feet, unless abnormal conditions are encountered during drilling which make drilling to such a depth impractical on technical or economic grounds.”
One provision not included when PL 006 was awarded in 1965 concerned the section in chapter 6 on state participation. This stated that:
“The Licensee will pay 10 per cent of the net profit achieved by the Licensee from the sale of produced petroleum, etc, from this licence. The more detailed content of this participatory right is specified in the “Agreement” with annexes attached as appendix 1 and forms part of this production licence.”
The “Agreement” specifies in part that “no payment will fall due until the Licensee has covered the costs and investments incurred in connection with exploring for and producing petroleum in this licence.”
Magnetometric methods are based on the fact that all rocks contain a certain amount of magnetic particles. This content varies from rock to rock, and the differences can be measured with sensitive instruments. Magmatic (igneous) and metamorphic rocks contain far more magnetite than those derived from sedimentary deposition. That makes it possible to identify areas of extensive sedimentation which could contain hydrocarbons.
Gravimetric methods are based on measuring changes in the Earth’s gravitational force which derive from the varying densities of different rocks. Gravity will be stronger over a dense rock than over lighter sediments. Gravimetry was used with great success in the Ekofisk area to which Valhall belongs.
