The North Sea Rush

The wind-whipped waters of the North Sea usually roil in a fit of rage, the skies are oppressively gray, and the fog hangs on for weeks. Yet visitors are flocking to the sea's cold coastline as if it were the Riviera. They are coming to join the world's most frenetic rush for undersea oil and gas. No fewer than 350 companies and consortiums have begun putting up money for the search, investments expected to total $12.5 billion over the next ten years. Their ranks include such American giants as Exxon, Texaco, Mobil, Gulf and Phillips.

The first solid indications of natural gas under the North Sea came from a discovery in Holland as far back as 1959, but the first two oilfields in the sea did not begin producing until last year. At least four more fields are scheduled to begin pumping by the end of 1974. Total deposits under the chill waters are estimated to be 12 billion bbl. of oil and 50 trillion cu. ft. of gas. That is rather small by Middle Eastern standards--the oil reserves would supply only two years of Mideast production--but large by almost any others. For example, the North Sea deposits probably exceed the 10 billion bbl. of oil estimated to lie under Alaska's North Slope.

North Sea oil is low in sulfur content, and thus relatively nonpolluting. More important, it lies on Western Europe's doorstep; British Petroleum's "Forties" field (see map) is only 115 miles off the Scottish coast. By contrast, much Persian Gulf oil must now be hauled 11,000 miles by tanker around Africa before it reaches Europe. Fuel from the North Sea promises to supply 10% to 15% of Europe's energy needs by 1980--not enough to materially reduce dependence on the Mideast, but perhaps sufficient to enable the Continent to survive a brief shutoff of Mideast oil.

Bringing the oil out, however, in the face of the North Sea's 100-m.p.h. winds and 90-ft. waves presents a formidable technological challenge. Brown & Root, a U.S. construction firm, is helping to build two semisubmersible drilling platforms for British Petroleum in Scotland. They will be 700 ft. tall, about the size of the largest office building in Europe. A Norwegian firm is building for Phillips Petroleum a 1,000,000-bbl. at-sea storage tank with a double shell; the exterior is perforated to absorb the impact of the giant waves. This technology is so expensive that capital costs of drilling average 20 times higher than those encountered on land in the Middle East. Still, savings on transportation costs and taxes will enable oil companies to earn an estimated $1-a-barrel profit on North Sea oil, or considerably more than they get on Mideast oil delivered in Europe.

Several European governments will benefit especially from the boom. The British government eventually will be extracting about $1.2 billion a year in taxes from private producers operating in its area of the sea--in addition to its interest in the profits of British Petroleum, which is 48% owned by the crown. Norway will have to export the oil from its area, since the undersea terrain makes building a pipeline to Norway impossible. Two weeks ago, the Norwegian Parliament approved a proposal to pipe oil from its Ekofisk fields to Britain and gas to Germany. By 1980, sales of North Sea oil could be providing the equivalent of $100 annual income for every Norwegian. The Oslo government is trying to increase the take by insisting on a 50% interest in all drilling operations, and is considering demanding that drillers buy equipment and supplies from Norwegian firms unless prices are uncompetitive. Some oilmen now call Norwegians "the blue-eyed Arabs of the North."

Scotland stands to benefit too. Aberdeen, once a somnolent fishing city, has become the undisputed center of the oil rush. Some 250 companies, many of them American-owned, are supplying everything from helicopters to hot meals for the drillers; unemployment in the city has dropped to 2.7%, half the Scottish average. But Aberdonians do not count the boom an unmixed blessing. Oilmen confide that the danger of a pipeline break under the North Sea is high. Many Scots worry that some day a tide of oil will roll in from the sea, burying their sandy beaches and destroying watering spots for migrating swans and geese.

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