AmocoNoco starts to drill
H W Dalton, a young Amoco geologist, wrote on 22 July 1965: “Of the 12 blocks we will probably be awarded by the Norwegian authorities, only three are of interest at the moment. The most attractive is block 2/8, where a large anticlinal structure is well defined on three different seismic maps.”
This view was expressed before anyone had drilled in the Norwegian North Sea, or even knew whether oil and gas were to be found. Given the discoveries made, it must be called prescient.
On the track of Valhall
Some of the partners in the Norwegian Oil Consortium (Noco) were interested in a participation which went beyond providing financial resources.[REMOVE]Fotnote: Leif Dons in the Festschrift honouring Fred Olsen on his 70th birthday.
That applied particularly to Aker, where management grasped at an early stage that oil exploration involved a big and long-term investment. To make money fast, the company had to produce equipment or sell services to the explorers.
A story about Aker chief executive Martin Siem and chairman Fred Olsen illustrates this. Siem had heard from the Americans that the people who did best out of the Alaskan gold rush were not the prospectors but those who ran the brothels. “We took the point,” Fred Olsen has since commented.[REMOVE]Fotnote: Fred Olsen in an interview with Sigvart Østrem, Norwegian Broadcasting Corporation (NRK), 8 June 2009.
Aker’s first big project was the acquisition of Thorshøvdi , an old whale factory ship. This was converted to a drill ship under the name Drillship for operation by Drill Sea Associates in Houston, Texas, and chartered to AmocoNoco. It was the largest vessel of its kind, with 107 berths.
AmocoNoco spudded its first well on 11 June 1967 in block 2/8. Despite the conversion, which included such new equipment as side thrusters, Drillship suffered big problems in keeping position during drilling – even under normal weather conditions.
Nor did the vessel look particularly attractive. When it was berthed at one point in the supply base at Tananger near Stavanger, local daily Stavanger Aftenblad was not impressed by Drillship ’s condition.
In the paper’s view, the ship bore witness to a long and hard struggle against sea and weather and looked as if it had spent five seasons consecutively in the Antarctic.[REMOVE]Fotnote: Øyvind Kvaal, articles in Amoco Viking.
Drillship was really put to the test by the tough weather conditions in the North Sea during the winter and spring of 1968. A powerful storm that January tore the ship free of its mooring chains and drove it all the way to the Scottish coast.
After drilling had resumed, the same thing happened again. Although the ship managed to remain on station this time, it clearly needed strengthening and further improvements. This was done at the Akers mek Verksted yard in Oslo.
Another spring storm struck when Drillship was back in drilling position and made life difficult for the crew. A tool got struck fast during wirelining, and the subsequent fishing operation to get it back lasted two weeks.
Then a pipe got stuck on 13 June 1964, and the drilling crew had to change the well path. This recurred a week later, and preparations began for yet another change of direction.
But the misfortunes kept on coming. A storm on 22 June broke several mooring chains, and Drillship was driven so far out of position that the casing string at the seabed was destroyed.
An investigation showed the damage was so extensive that further drilling in the same well was technically impossible, since safety equipment could no longer be attached to the casing. The government gave consent for the well to be plugged and abandoned.[REMOVE]Fotnote: Øyvind Kvaal, articles in Amoco Viking.
Drillship was then redeployed to southern latitudes in order to drill on the Israeli continental shelf in the Mediterranean, where the weather conditions were much less exacting.
Aker’s first attempt to deliver services to offshore operations on the Norwegian continental shelf (NCS) had accordingly not gone so well.
The ship had drilled to depth of 2 638 metres in 70 metres of water, and the well proved to be dry.[REMOVE]Fotnote: www.oljepionerene.no/skriv/wells.php3. All the accidents had made this an expensive exercise.
Stavanger Aftenblad reported that it was thought to have cost about NOK 50 million, twice the usual figure.[REMOVE]Fotnote: Øyvind Kvaal, articles in Amoco Viking. Fortunately for Noco, it did not have to pay its share of this initial operation.
On the other hand, Norwegian oil history could have taken a different course if the authorities had insisted that the well should be drilled to its planned depth.
That was because the geologists had picked the right spot. The AmocoNoco group confirmed in 1975 that well 2/8-1 was right in the centre of Valhall.
Had Drillship continued for another 100 metres, this field would have been discovered 18 months before the giant Ekofisk discovery. The industry ministry was notified of the latter on 23 December 1969.
Instead, despondency was beginning to spread. The other companies were not achieving particularly positive results, either. Balder was the only exception, with a small quantity of oil recovered from this discovery in 1967.
Almost as a quirk, this production was refined so that industry minister Sverre Walter Rostoft could run his car on Balder petrol. But the field was not considered commercial with the technology of the day.
Cod raises hopes
To maintain interest, the government offered additional acreage during May 1968. Those who had received licences in 1965 could apply for 68 new blocks. (See the article “Could Valhall have been Danish?“).
Before any awards were made, however, fresh hope was raised by a Phillips-group discovery in June 1968. Named Cod, this consisted mainly of heavy condensate. But there appeared to be a lot of it.
The Norwegian Petroleum Council now felt it was more strongly placed in relation to the oil companies, and wanted to find forms of state participation in the offshore sector.
Phillips Petroleum offered the government the right to participate on a “carried interest” basis for up to 17.5 per cent in new commercial discoveries.
A similar deal was accepted by the Petronord group. Esso was opposed in principle to government involvement, but accepted that the state should have a 17.5 per cent “net profit” interest.
The AmocoNoco group also acquired a net profit agreement. This reduced the government’s share of net profit to 10 per cent, since Noco represented Norwegian interests.
Several of the participants were negative to the issue of state participation being raised after their application had been submitted. It was attacked as tantamount to moving the goalposts during the game. But the oil companies had little power to oppose the government’s decisions.
Before the AmocoNoco group submitted its application, the Norwegian business leaders in Noco conducted their own negotiations with the Americans in Amoco, Amerada and Texas Eastern on the division of interests in possible new licences.
Opinion in Noco was divided over whether to aim for a 15 per cent share, as in the first licensing round, or to seek a larger participation.
Chairman Olsen was keen to obtain a higher stake, while managing director Hagerup-Larsen tried to encourage restraint. The upshot was that Noco obtained 25 per cent, putting all the partners on an equal footing.
AmocoNoco secured its two highest-priority blocks – 2/9 and 2/11, which also interested the Phillips group – in this second round.
Drilling took place in 2/11 during the autumn of 1969, and the prospectors got a whiff of Valhall in the extreme south-western corner of this field.
Spudded by the Orion rig on 14 July, the 2/11-1 well found an oil zone about 10 metres thick in a chalk stratum 2 700 metres beneath the seabed.
Drilling was completed on 3 October, and the optimists were on the verge of being proved right. But it was not clear at this time what had been discovered.
Seismic data covering Valhall was difficult to interpret because large volumes of gas were present in the rocks above the chalk layer which contained the oil.
By delaying the sound waves generated in seismic surveying, this made it impossible to “see” the underlying crude and meant that drilling failed to target the area with the most oil.
Although the seismic information could not be interpreted correctly, however, the 2/11-1 discovery was a milestone because it represented the first indication of hydrocarbons in a chalk formation on the NCS. It can thereby be regarded as the forerunner of the Ekofisk discovery. (Read more under “Discovery of Hod and Valhall“.)Could Valhall have been Danish?The creation of Saga Petroleum