Norwegian petroleum history
At the end of the 1950s, very few people believed that the Norwegian continental shelf concealed a wealth of oil and gas. But the gas discovery in Groningen in the Netherlands in 1959 led to newfound optimism surrounding the North Sea’s petroleum potential.
In October 1962, Philips Petroleum sent a letter to the Norwegian authorities requesting permission to conduct exploration in the North Sea. The company wanted a licence for the parts of the North Sea on the Norwegian continental shelf. The offer was USD 160 000 per month and was regarded as an attempt to acquire exclusive rights. For the authorities, it was out of the question to surrender the entire shelf to one company. If the areas were to be opened for exploration, more companies were needed.
In May 1963, the government proclaimed sovereignty over the Norwegian continental shelf. A new act stipulated that the State was the landowner and that only the King (Government) could grant licences for exploration and production. But even though Norway had proclaimed sovereignty over vast ocean areas, a few important clarifications were still needed regarding delineation of the continental shelf, primarily in relation to Denmark and the UK. Agreements regarding delineation of the continental shelf on the basis of the median line principle were signed in March 1965 and the first licensing round was announced on 13 April 1965. 22 production licences were awarded, covering 78 blocks. The first exploration well was drilled during the summer of 1966, but turned out to be dry.
With the discovery of Ekofisk in 1969, the Norwegian oil adventure started in earnest. Production from the field started on 15 June 1971 and during the following years, several large discoveries were made. In the 1970s, the exploration activity was concentrated in the North Sea, but the shelf was also gradually opened northwards. Only a limited number of blocks were announced for each licensing round and the most promising areas were explored first. This led to world-class discoveries and the production from the Norwegian continental shelf has been dominated by these large fields that were given names such as Ekofisk, Statfjord, Oseberg, Gullfaks and Troll. These fields have been and still are very important for the development of the petroleum activities in Norway. The development of the large fields has led to the establishment of infrastructure, enabling tie- in of a number of other fields. The production from several of the major fields is declining now, as new, smaller fields have established themselves. Therefore, Norwegian petroleum production is currently divided among more fields than before.
In the beginning, the authorities chose to start with a model where foreign companies operated the petroleum activities. This meant that foreign companies initially dominated the exploration activities and developed the first oil and gas fields. Eventually, the Norwegian involvement increased with Norsk Hydro joining in, and in 1972, Statoil was established with the State as sole owner. A policy was also established mandating 50 per cent State participation in each production licence. In 1993, this principle was changed so that an assessment is made in each individual case as to whether there will be State participation and whether the ownership interest will be higher or lower. Another private Norwegian company, Saga Petroleum, also established itself. In 1999, Saga was acquired by Norsk Hydro while Statoil was partly privatized in 2001 which led to the establishment of Petoro. Petoro then took over the handling of the State’s direct financial interest (SDFI) established in 1985, from Statoil. In 2007, Statoil merged with Norsk Hydro’s oil and gas activities. Today, about 50 Norwegian and foreign companies are active on the shelf. The current oil production and its importance for the Norwegian economy are discussed in Chapter 3 – The petroleum sector – Norway’s largest industry.
What is petroleum?
Oil and gas are formed over several million years through decomposition and conversion of organic matter deposited in ocean areas. Most of the oil and gas deposits on the Norwegian continental shelf originate from a thick layer of black clay that is currently several thousand metres under the seabed. The black clay is a source rock, which means a deposit that contains significant organic residue. The clay was deposited around 150 million years ago at the bottom of a sea that covered much of present-day northwestern Europe. This sea was unique in that the seabed was dead and stagnating at the same time as the upper water masses were teeming with life. Large amounts of microscopic phytoplankton accumulated in the oxygen-free bottom sediments. Over time, they were buried deeper, and after a long chemical conversion through bacterial decomposition and subsequent thermal effects, liquid hydrocarbons and gas were formed in the source rock.
During oxygen-free decomposition of organic matter, substances such as kerogen are formed, which in turn creates oil and gas at increased temperatures and pressures. On the Norwegian continental shelf, the temperature increases by 25 degrees per kilometre of depth. After more than one hundred million years of erosion and depositing, there can be several kilometres of clay and sand over the source rock. Oil is formed when the kerogen’s temperature reaches 60 – 120 degrees; at higher temperatures, mainly gas is formed.
As the oil and gas are formed, they seep out of the source rock and follow the path of least resistance, determined by pressure and the rock’s permeability. Because hydrocarbons are lighter than water, they will migrate upward in porous, water-bearing rocks. The oil and gas migration takes place over thousands of years and can extend over tens of kilometres until it is stopped by denser layers. Reservoir rocks are porous and always saturated with various compositions of water, oil and gas. Most of Norway’s petroleum resources are trapped in reservoir rocks deposited in large deltas formed by rivers that ran into the sea during the Jurassic Age. The main reservoirs on e.g. the Gullfaks, Oseberg and Statfjord fields are in the large Brent delta from the Jurassic Age. Large reserves are also found in sand deposited on alluvial plains from the Triassic Age (the Snorre field), in shallow seas from the Late Jurassic Age (the Troll field) and as subsea fans from the Paleogene Age (the Balder field). In the southern North Sea, thick layers of chalk, consisting of microscopic calcareous algae, are an important reservoir rock.
Clay stone and argillaceous sandstone form dense deposits that affect the migration routes from the source rock to the reservoir. They are also essential for keeping petroleum in place in the reservoir over an extended period of time. Dense deposits that form a cap over the reservoir rocks are called cap rocks. In addition, the reservoir rocks must have a shape that collects the oil: a trap. When an area contains source rocks, reservoir rocks, cap rocks and a trap, the preconditions are present for discovering oil and gas deposits.