SCOTLAND’S ATLANTIC FRONTIER OIL PROVINCE

by Graeme Robertson, Director, Habitat Scotland

After 25 years of exploration and production, the North Sea has become what geologists call a “mature” province in which most of the giant oil and gasfields have probably already been found. This does not necessarily mean that production is on the decline. On the contrary, there are several hundred small oil and gas accumulations for which no development plans have so far been made. With appropriate low-cost technology, many could probably be linked to existing North Sea platforms and pipeline systems to maintain a sizable flow from the established production area well into the 21st century.

But most of the excitement on the exploration front during the last three years has been generated by the discoveries in the Atlantic. The first production is due next Spring from British Petroleum’s Foinaven field which is thought to contain recoverable reserves of between 250-500 million barrels - putting it in the much sought-after “elephant” category. The company is pushing ahead with the pioneering venture, as well as making plans for a second development at its Schiehallion field in the same area.

BP is one of 15 companies exploring the 1,500ft-deep sea bed, 100 miles west of Shetland on the edge of the continental shelf, where at least five significant oil discoveries have been made to date. However, there is concern about the methods the industry will use to bring oil ashore. Instead of going through a pipeline, subsea wells feed oil into flow lines connected to manifolds which pump the oil up through flexible hoses to a floating production and storage vessel. Every few days a “shuttle” tanker moors up to a loading buoy near the stern and, in about 10 hours, takes on board 60,000 tonnes for delivery to an onshore terminal. The method is more cost effective than building a pipeline to the nearest landfall but some recent research indicates it may pose greater risks.

Dr Jon Side, director of Heriot-Watt University’s International Centre for Island Technology based in Orkney, said: “Figures from the activities of the industry to date suggest there is a 20 times greater chance of an oil spill using offshore loading than from a submarine pipeline. Companies say this will change because they will be using the best new technology, but we will have to wait and see.”

Dr Martin Angel, of the Institute of Oceanographic Sciences said: “Accidents will happen, whatever we do. We don’t really know enough about the ecology of the continental shelf and if we foul it up, we could make some appalling mistakes.”

The vice-chairman of Shetland Islands Council’s marine operations committee, Dr Jonathan Wills, said: “The risks of spillage from offshore loading in the open ocean are considerable. From October to April there is very little chance of recovering any Foinaven oil that is spilled. Temperatures are so low that the oil, which is thick and waxy, would hardly evaporate and disperse naturally like lighter North Sea oils.” Evaporation and dispersion were the only factors which saved the Shetlands from long-term environmental damage after the Braer tanker disaster two years ago.

BP’s laboratory tests and computer studies have shown that Foinaven oil would be churned up by wind and waves into an emulsion, known as “mouse”. Spray chemicals could disperse less than a fifth of it. There own research reveals that a surface slick could reach the shores of Orkney andShetland in 50 to 72 hours because of the current and the prevailing winds. This means a very short response time and the dangers to fishing grounds, salmon farms, wildlife and the tourist trade are obvious.

Contingency plans must say where the oil company will keep stocks of chemicals and dispersants to tackle a slick. BP says the main depots for Foinaven will be Aberdeen, Dundee and Southampton. Even if stores in Sullom Voe were used, it could be 24 hours before containment and recovery gear was out on site. One oil pollution control expert said that trying to deploy floating booms and skimmers - to corral spilled oil and suck it up - would be of little use most of the time in the Atlantic.

The possibility of laying undersea pipelines is to be studied by BP since further finds in the area could increase the flow sufficiently to support a joint-user pipeline system. It is understood that a combined throughput of about 300,000 barrels per day (bpd) would be required to make a large-diameter pipeline economic. However, the technology is not yet available to enable subsea pipelines with diameters greater than 28in to be linked to floating production vessels such as the one BP has converted for the £550 million first phase of their Foinaven project.

Another problem will be controlling the build-up of wax caused by the oil flowing more than 100 miles through pipelines at low seabed temperatures. Studies will examine methods of “pigging” lines of different diameter by using oil pressure to pump through devices which scrape the inner walls.

Political Dispute

Britain and Denmark, which represents the 40,000 inhabitants of the Faroes in international negotiations, have a long-standing dispute over carving up the “white” zone between the areas which each country has designated for exploration. Diplomatic exchanges have been bogged down in technical discussions on how much weight should be given to small uninhabited islands off the Scottish coast and whether the sparsely-populated Faroes should qualify for full country status in dividing up huge parts of the Atlantic.

Tensions appear to have eased since earlier this year when the Danish Prime Minister said his country would stand firm behind the Faroese islanders against what he claimed were bullying tactics by Britain. He suggested that the issues might have to go to the International Court of Justice at The Hague, indicating a lengthy delay before they could be settled.

Apart from UK interest in rapid development west of Shetland, the Faroese are keen to tap into oil revenues to offset the disastrous decline in fishing, which still accounts for virtually all of their foreign earnings apart from 1 per cent said to be from the sale of postage stamps.

The discoveries in the UK designated area point to good prospects for oil reserves extending into the Faroese sector. BP are rumoured to have made an oil find last year near to the disputed area and Western Geophysical have won an exclusive licence to carry out 12,000 kilometres of seismic surveying within the Faroese-designated area. Under the terms, Faroese authorities receive a share of revenues from sale of the data.

Economic Repercussions

The new Atlantic frontier is having many repercussions for the local economies of Orkney and Shetland. At the end of April 1995 Orkney was celebrating while Shetland was left to ponder an uncertain future after the Elf Enterprise-operated Flotta terminal won the key contract to take oil from the Foinaven field. BP had ruled out an option to ferry the oil to Rotterdam and had been left with a choice between the terminals at Flotta, Sullom Voe and Nigg in the Cromarty Firth.

Under the five-year contract, shuttle tankers will deliver the 85,000 bpd of production from Foinavon, 130 miles north-west of Orkney, to Flotta for storage. The oil will then be transferred to supertankers for distribution to refineries around the world. The contract is expected to increase the throughput at Flotta by at least 25% and will mean extra cash flowing into Orkney’s oil revenue fund, currently standing at £100 million.

Flotta’s victory, however, was a body blow to Shetland’s BP-operated oil terminal and increased the pressure on both the islands’ council and terminal management to find ways of cutting costs. Shell Expro and Chevron, the oil companies which operate the two pipelines bringing oil ashore at Europe’s largest terminal, are threatening to switch to offshore loading when their current agreements expire in five years.

In August Shetland Islands Council offered to cut its £7.8 million annual rent for Sullom Voe by half to save it from closure but in return was seeking:

• guarantees that oil from the Brent and Ninian fields will continue to be piped ashore beyond the year 2000
• immediate access for council experts to examine the physical condition of the plant and to examine all levels of spending at the terminal
• greater involvement in the future marketing and strategic decisions affecting the complex through the existing Sullom Voe Association.

The new director of BP in Scotland was quick to acknowledge this “huge breakthrough” but warned that the council would have to make even more cost-cutting concessions. By September the council was prepared to sacrifice its entire income from the terminal if it could be proved to the Shetland public, the Scottish Office and the Treasury that such a move was necessary to secure the long-term future of Sullom Voe.

Malcolm Green, the council’s chief executive, said “the value of the terminal to the Shetland economy is far in excess of any income the council derives directly from it. An estimated 2,000 people, mainly young families, would quit the island, leaving behind an ageing population. There also would be a loss of confidence and a lack of investment in the economy.”

Mr Green said there was still a big gap between the two sides. The companies claim that the cost differential between Sullom Voe and tanker-loading is £16 million a year, while the council claims the amount is £500,000. Both sides, he stressed, had to agree the actual difference to enable the council to go ahead with any necessary cuts. The Government has already promised to reimburse the islands council for any loss of income from the terminal, provided that such a loss could be justified.