We think this still stands as one of the more engaging accounts of just what is going on up there, on the storm-swept fringes of the British Isles.  

FACING THE CHALLENGE

There are some regions of the world where oil is relatively easy to find, to extract, and to exploit economically. Regions where reliable weather conditions combine with the accessibility and sheer bulk of reserves to simplify the economics of exploration and production. The North Sea is not such a region.

Oil is not easily found here, or easily exploited - for this is one of the more inhospitable and isolated places in the world, with wild waters, strong winds and biting cold. But the challenges are not simply limited to those of a geographical or meteorological nature. External factors largely beyond any individual company's control - such as world oil prices - also have a crucial bearing on the viability of projects which are, by their very nature, long term.

It has taken a colossal investment of human effort, finance and technology to develop this resource-rich area from fishing ground to globally-significant oil-producing region. However, today, the constraints are changing.

It is unlikely that the North Sea contains further undiscovered large and relatively accessible reserves. Production has probably peaked. The challenges of the North Sea that face us today are increasingly those of finding new and innovative ways to locate and extract smaller reserves economically.

Reserves which would once have been considered too small to justify production are becoming viable: particularly in areas where an infrastructure of platforms and pipelines is now in place. Here, technological ingenuity can often generate good returns from relatively low levels of additional investment.

As a company involved in the drilling of the first-ever well in the UK North Sea in 1964, and recognised and respected in the industry for its technological innovation, Texaco is ideally placed to continue meeting the demanding challenges of the North Sea, capitalising on the opportunities it offers, well into the 21st century.

TEXACO IN THE NORTH SEA

Until the 1960s, oil industry interest in the North Sea was minimal. Although existing geological evidence indicated the possibility that hydrocarbons were present, the easy accessibility of the vast resources of the Middle East placed a low premium on exploratory ventures. There
was little incentive offered to companies to invest resources on the kind of scale which would clearly be necessary to successfully exploit an area as difficult as the North Sea.

In 1964 the British Government set out the terms on which licences to explore the North Sea would be issued, in the Continental Shelf Act. Later that same year companies were invited to participate in the first UK offshore licensing round, and in the last few days of 1964 Texaco, as a partner in Amoseas, drilled what was the first oil well on the UK Continental Shelf. Although the well proved to be a dry hole, it heralded the beginning of a new era in exploration.

Two major stumbling blocks stood in the way of progress when serious exploration began in the late 1960s and early 197Os: lack of knowledge of the geology and the need for new technologies and expertise.

Succeeding years saw a gradual resolution of these problems. Texaco steadily acquired more exploratory acreage from the UK Government, and in 1973 acquired a 25% stake in the Argyll Field, participating in the first North Sea oil to be produced in the UK sector.

On Boxing Day 1974 Texaco found oil - in what was to become the Tartan Field.

It took four years, 11 additional exploratory wells and numerous sophisticated studies to establish the economic viability of Tartan, and to get the necessary government approvals for development. It took another three years to get the platform constructed and installed. On January 9, 1981, production began.

In February 1984 Texaco Inc's acquisition of Getty Oil's UK assets brought in Texaco an immediate boost in equity production to the tune of some 70,000 barrels
of crude a day, with a share in the Piper, Claymore and Heather fields. Texaco thus became the fifth largest UK North Sea oil producer.

In the meantime, exploration on and around Tartan continued.

The Highlander field had been initially discovered in 1976, but at the time existing technology and UK tax and royalty legislation made recovery of the estimated reserves of 35 million barrels economically unattractive.

While legislation was beyond Texaco's control, technical problems were not. Research and development continued, and by 1983 when the government changed tax and royalty law to encourage marginal exploitation, Texaco technology was developing rapidly. The revolutionary Highlander subsea facility was put in place, linked to and controlled from the Tartan platform. In 1985, production began, followed in 1986 by production from the Petronella field which was also exploited using similar subsea technology.

TURNAROUND THROUGH TECHNOLOGY

By 1982, Tartan was generally regarded as something less than a triumph: and within Texaco itself, it was well known that the field was much smaller and less productive than had originally been thought. But by 1988 Tartan was acknowledged to be a significant success story. The turnaround in the field's fortunes was achieved through a combination of imagination, determination and engineering innovation.

In line with its initial North Sea strategy, Texaco developed Tartan and subsequently Highlander and Petronella as a sole venture. At that time, the Tartan platform was the only wholly-owned and operated development in the North Sea.

Located between the high-yielding Piper and Claymore fields, there was every reason to expect substantial reserves. Yet the Tartan platform, designed to accommodate production of up to 75,000 barrels of crude per day, was, in 1982-3, producing no more than a third of that figure: a rate of production which offered little prospect of recouping the initial investment which had been made.

Even so, Tartan offered much to be proud of. It was widely recognised as one of the most efficient platforms; it had (and still has) an enviable record for safety, and for maintenance of the highest standards of environmental protection. And by late summer 1986 it also featured a genuine technological innovation: the first on-platform facility for 'sweetening' - removing
excess hydrogen sulphide from crude oil. But the inescapable fact remained: judged by the overriding criterion - the financial bottom line - the Tartan field was not of itself a success.

However, the Tartan production platform did provide the foundation for financial success. The essential substantial investment had been made: the challenge that remained was to exploit it more fully.

Reserves in Highlander were too small to justify recovery by conventional methods. A self-contained platform dedicated solely to Highlander would not be economic. Nor was it really necessary - Tartan was operating below capacity: the challenge was to link Highlander to Tartan in such a way that Highlander could use that surplus capacity. The most obvious solution was to develop a subsea facility. Before that, two fundamental problems had to be overcome.

First, Highlander was eight miles from Tartan and in 480 feet of water. A link-up across such distances had never been attempted. Secondly, exploiting Highlander would call for the installation of additional equipment on Tartan to enable the platform to accept the incoming production - but Tartan could not take the extra load. Although the platform was quite capable of processing a higher flow rate, its 'jacket' - its basic structural skeleton - was already carrying
virtually as much weight as it was originally designed to accommodate. Only technical innovation could make the Highlander piece fit into the Tartan jigsaw. And financial constraints meant that Highlander would have to generate income from a very early stage in order to help finance the development of the necessary technology.

The last of these problems was, in fact, the first to be solved - eight miles of pipeline was laid on the sea bed, and connected to one of the appraisal wells, providing an initial flow of 14,000 barrels of crude per day. The revenue generated was devoted to the development of the new subsca facility, and of the special equipment required to adapt Tartan to receive Highlander's
production without imposing any additional load on it. It was important to ensure that the new technology worked faultlessly from the outset, for both financial and environmental reasons.

For Tartan to receive Highlander's production, two basic pieces of additional equipment were required: a 'slug-catcher' on the sea bed to act as a shock absorber, protecting Tartan's sophisticated processing equipment from alternating surges of oil and gas; and some means of getting the oil and gas onto the platform from the slug-catcher. Both would have to be self-supporting to avoid extra load on the platform.

Texaco construction department engineers, working closely with specialist engineering companies in Aberdeen, developed both the needed slug-catcher (or separator) and TARA - the Tartan Additional Riser Access system.

TARA is a radical innovation which carries four flowlines and three umbilicals from the base of the platform up 520 feet to link into Tartan's production facilities. Rooted 220 feet into the seabed, the system is entirely self-supporting.
In September 1985, Highlander came fully on-stream, producing 40,000 barrels per day from an estimated reserve of 20 million barrels - since revised to 55 million barrels.

The turnaround in the financial fortunes of the entire Tartan development was emphasised by the subsequent development of the Petronella field. This was a modest reserve of about 16 million barrels but it was exploited through extremely cost-efficient technology. Imagination and innovation - both financial and technological - had once again overcome the difficulties, placing Texaco firmly ahead of the industry in subsea engineering technology.

PROTECTING PEOPLE AND THE ENVIRONMENT

The Piper Alpha disaster in July 1988 brought North Sea safety sharply into focus. But safety has always been at the top of Texaco's - and the whole North Sea oil industry's - list of priorities. All aspects of safety and environmental protection, far from being add-ons or
afterthoughts, are, and have always been, integral to the entire process of getting oil from the ground to the end-user.

The special conditions of the North Sea, however, dictate the need for special controls. Where enormous volumes of volatile materials are passing through processing facilities in an extremely hostile environment, an element of risk is unavoidable. Minimising that risk is
achieved by a complex interconnecting network of systems, controls and regulations.

There are three fundamental aspects to safety: people, procedures, and equipment. Clearly these are totally interdependent: the chain is only as strong as its weakest link. Hence the stringent controls applied to each link.

Human error - always the most unpredictable factor in the equation - is minimised through rigorous training of all personnel, both direct employees and contractors.

Stringent safety and operating standards are set by Texaco, and all categories of offshore personnel must attend a course of training at one of the approved establishments listed by the Offshore Petroleum Industry Training Board. There are regular 'refresher' courses to keep personnel up-to-date.

And Texaco, like most other North Sea operators, conducts HAZOP (Hazard and Operability) studies. These originated in the chemical industry. Exercise participants begin by assuming the worst possible scenario and work back, establishing checks and controls to ensure that the scenario could never arise in reality, human error notwithstanding. The systems and procedures then established are themselves subject to regular and rigorous inspection reviews.

Much of the equipment used in the North Sea is sourced from independent specialist equipment suppliers, and Texaco is a founder member of QUASCO (Quality Appraisal Service Company) Ltd, a company set up specifically to ensure the maintenance of the highest standards of quality control among equipment suppliers.

Texaco is proud of its safety and anti-pollution record in the North Sea - but pride is no ground for complacency. Every aspect of the company's safety systems and procedures is constantly under review, in pursuit of the overriding target: an accident and incident-free record sheet.

OFFSHORE, ONSHORE

Mention the North Sea and the images that naturally spring to mind are those of a platform flare in the night, or roughnecks wrestling with drilling gear. Less photogenic, yet equally vital, is the unseen organisation which lies behind the drill bit - the people back onshore.

Without the behind-the-scenes work of all these land-based employees - those with technical expertise: the planners, the accountants and administrators and all who contribute to the day-to-day running of operations - life ashore would be very different.

Explorationists resist attempts to cast them as 'the cavaliers . . . the frontiersmen' of the business, preferring to describe themselves less romantically as being 'at the front edge of the business'. Yet they are in the vanguard of everything that happens in the North Sea. Their job, together with that of the development geologists, is to delineate the extent and the boundaries
of hydrocarbon deposits: their input is an essential precursor to the decision as to whether any specific project is economically viable.

Significant advances in geophysics and geology over recent years have been invaluable, increasing the accuracy in interpretation and prediction of the presence of hydrocarbons, and improving the resolution of the two-dimensional cross-sections and maps which are an essential product of the exploration division. This precision is increasing in importance as the business
of the North Sea becomes more and more the business of the marginal fields. The smaller the deposit, the more critical the economic equations.

Engineers of many disciplines and operations personnel are responsible for organising drilling production operations to ensure that production levels are maintained and ultimately that the yield from any given reserve is maximised. In many cases this means forgoing short-term glut in favour of long-term reward.
The difficulties presented by the North Sea above water level are mirrored by those deep below the sea bed. Though the North Sea was originally thought to be a 'sweet' area, Tartan's crude proved to be 'sour' - high in hydrogen sulphide - necessitating the development of
offshore sweetening facilities. Some of the crude discovered in the North Sea has proved unusually heavy - hence more difficult to recover, and less valuable when recovered.

Many reservoirs have proven to be exceedingly complex - are the reserves technically recoverable? And if so, is recovery financially viable? These questions present great challenges for reservoir engineers and research staff who must employ development and recovery
techniques that ensure a satisfactory return on the huge investments made in these high-risk ventures. Texaco's history in the North Sea has been one of developing innovative engineering solutions to a succession of challenging problems.

Like its fellow North Sea producers, Texaco faces the constant challenge of maximising financial yields, within a complex network of competitive and legal constraints. North Sea taxes are always an important factor in the rate of return of any project - be it exploration, development or tariffing for example, or in buying, selling or exchanging acreage or reserves.

The company is continuously involved in negotiations with other companies to obtain the best possible terms for using each other's facilities and these negotiations call often be the single most crucial factor in determining the viability of a project.


LOOKING TO TOMORROW

Texaco's established traditions of innovative research and development technology, financial responsibility and an overriding concern for the environment provide an excellent foundation for its future in the North Sea. The face of the North Sea is changing - and Texaco is changing with it.

The company is developing systems and harnessing technology to reduce paperwork and increase productivity and efficiency in all areas. Almost everyone in the organisation has hands-on computer experience, and through Texaco's exceptional computer networking system, can obtain direct access to a worldwide database of expertise and experience.

Texaco worldwide is producing technological developments of immediate value and long-term potential application for wherever conditions are hostile or otherwise problematical. Texaco in the UK works closely with its American parent in developing new technologies which will make the business of exploration and production safer, more efficient and more cost-effective. It has also been closely involved in projects developing subsea wirelining, subsea production systems and submersible vehicles.

Exploration and development around Tartan continues, along with economic viability assessments of other prospects. Texaco is also involved in active exploration throughout the UK continental shelf, including the Southern Gas Basin and - with joint venture partners - in and around the Argyll, Duncan, Innes, Piper, Claymore, Scapa, Nevis and Heather fields.

Texaco's proven North Sea expertise and experience were instrumental in its success in the 1989 11th licensing round - believed by many to be the last major government distribution of prime offshore acreage. The company was awarded operatorship of four blocks in quadrant 13 in the Inner Moray Firth and substantial interests in seven other blocks. The awards represented a 30 per cent increase in Texaco's UK net offshore licence acreage, and were a visible and important acknowledgement of the company's North Sea record.

Texaco's future in the North Sea is assured - to the turn of the century and beyond.

RISKS AND REWARDS

Risk is an inescapable fact of life in the oil industry. Vast quantities of highly inflammable substances going through enormously complex processes inevitably entail an element of risk. Add to that inherent complexity the particular physical difficulties faced in a region as hostileas the North Sea and the difficulties are redoubled.

Financially too, risk is an integral part of the equation. Exploration techniques improve constantly - the evidence provided by geophysics and geology increases the accuracy of predictions - but ultimately the only way to establish for certain whether or not hydrocarbons
are in any particular place is to drill a well. Millions of pounds invested on the basis of the best available information can still result in nothing more than a very deep and utterly worthless hole. 'Dry holes', indeed, outnumber successful ones: it's in the nature of the business.

And yet the search goes on.

Lessons learnt in the North Sea are an increasingly vital input to exploration elsewhere. In the Gulf of Mexico, in Alaska, perhaps ultimately in the Antarctic, North Sea investment experience will pay dividends well into the future. In the space of two and a half decades, the
UK has developed from keen student to active teacher - and as the world's demand for energy forces the oil industry into ever more hostile and inaccessible regions, its progress will draw more and more from North Sea experience.

North Sea oil has, for 25 years, been one of the most important factors in the UK economic equation: helping the balance of trade, providing vast sums for the Exchequer, and employing thousands of people - both directly and indirectly.

Texaco has played, and will continue to play, a very particular and important part in the North Sea story. As long as innovation and imagination remain key factors in these deep and unfriendly waters, Texaco will be at the forefront in meeting the essential challenge: winning a
resource mankind needs at a price it is prepared to pay.