Gas in the North Sea

Hopes that rich gaseous and possibly liquid hydrocarbon deposits exist in the North Sea bed were boosted considerably by a successful record of exploration in the British section of the Continental Shelf. Expectations regarding the North Sea's potential were seriously aroused about six years ago by the onshore discovery in the Netherlands of what has proved to be one of the world's largest natural gas fields. However, exploration of the North Sea itself could not start in earnest until the 1958 Geneva Convention concerning the exploitation rights to the Continental Shelf was appropriately ratified, the respective national enabling legislation passed, and fundamental agreements determining the main dividing lines among the coastal states concluded. These preliminaries were completed by 1964, but dividing lines between sets of nations involved continued to be negotiated, and not all the agreements that are required had been signed by the end of 1966.

The British portion of the Continental Shelf was opened first to massive exploration and drilling; this attracted the participation of the major international oil companies. Exploration met with early success late in 1965 when the British Petroleum Company (BP) announced a major discovery of natural gas located about forty miles east of the Humber Estuary. As developmental drilling confirmed the existence of substantial reserves, BP in 1966 entered into a contractual obligation for the delivery of natural gas to the British Gas Council, the government body controlling the distribution of gas (principally manufactured gas until now) in the United Kingdom. Deliveries were scheduled to begin in mid-1967.

Subsequent discoveries by others in the same general area suggest the existence of a major gas formation, which could be part of a gas-bearing stratum that underlies the northeastern shore of Yorkshire and encompasses a considerable offshore area lying roughly between Scarborough and Norwich. What is apparently the largest deposit yet struck, a Shell-Esso Group discovery, is located about twenty-five miles off the Norfolk shore in the so-called Rotliegendes formation. Speculative reports indicate that this field, struck last April, might eventually yield enough natural gas to replace the total UK consumption of manufactured gas at its present level. Although doubts persist about the size of this field, subsequent discoveries by other groups provide grounds for optimism.

Together with other reported discoveries and the identification of five and possibly six separate fields, these developments point to a substantial gas potential in the British portion of the North Sea. Yet, at this early stage in the process, wide differences of opinion exist as to the potential contribution that indigenous natural gas will make to the British economy. The chairman of the British Gas Council has speculated that up to 4 billion cubic feet of natural gas per day may be available by 1980. If so, this amount would cover some 10 to 15 percent of estimated British energy consumption in that year. Other competent observers doubt that the discovery and development of reserves sufficient to support such a level of output are probable. Meanwhile, a lively debate has sprung up on the policies to be pursued regarding costs, prices, and coordination of gas from northern Africa, from naphtha, from coal, and from the North Sea.

Among the other countries bordering the North Sea, West Germany has an ongoing exploration program in its portion of the Continental Shelf which has met with a small measure of success; Denmark and Norway have barely started exploratory work, while France and Belgium have so far shown no active interest.

The Netherlands is in a class by itself, because after an early start at exploring offshore it has turned all of its attention to putting its large onshore discoveries into commercial use. Pipeline networks are being constructed within the country and also to Belgium, West Germany, France, and Switzerland. In 1966, Dutch natural gas started flowing to Belgium and the northern parts of West Germany. It is expected that the deliveries will be extended to France in 1967 and that in 1968 Dutch gas will reach the southern parts of West Germany and even northern Switzerland around Basel.

Some observers suggest that these discoveries of natural gas are laying the groundwork for a revolutionary change in the pattern of energy consumption in Western Europe, which will lead to a substantial diminution in its sharply growing dependence on imported oil supplies. However, the long-run out-look, although favorable, is not nearly so dramatic. The OECD recently estimated that even under favorable assumptions the share of natural gas in Western Europe by 1980 would come to less than 10 percent of total energy consumption. In individual countries, particularly the Netherlands, the impact should be substantially greater, perhaps accounting for as much as 30 percent of the Dutch energy total in 1980. Incidentally, in the United States natural gas currently represents about 30 percent of total energy consumption.