Separating the myths from the facts about North Sea oil

As our domestic habits begin to change and talk turns towards inflation taking a hold in the wake of a sustained increase in the price of oil, I embarked on an investigation into Scotland’s relationship with the “black gold”.

The one thing that surprised me during the course of my investigation was that the proven reserves in some of the region’s oldest fields are in fact rising. The Forties Field, one of the biggest and most iconic, is still producing oil 33 years after the first crude was pumped ashore.

However, industry experts acknowledge that this is down to improved techniques for getting oil out the ground. Fields previously believed to have been exhausted are now worth a second look with better drilling technology that is helping to extend activity in the North Sea.

The same high oil price that makes it harder for the rest of us to drive to the shops on a whim is making it easier for companies to take a gamble on previously undeveloped parts of the North Sea. With a simple oil well costing $22m dollars to drill, exploration companies are taking a huge gamble.

The Canadian oil exploration company Oilexco last year drilled 39 out of 140 exploration and appraisal wells in the North Sea despite rising costs. Arthur Millholland, the company’s chief executive, says: “In 2004 we were paying approximately $55,000 a day for a drilling rig. Today we’re paying $350,000 a day. So even though the price of oil today is higher than it was in 2004, our costs of doing business here have increased just as dramatically.”

Nevertheless, the investment continues with the restructured industry better placed to shoulder the costs. Smaller firms with lower overheads, it seems, can go after smaller pockets of oil and still make a decent profit.

The question remains, however, how long will North Sea oil last?

The Times