Shell’s refinery at Sola

person by Trude Meland, Norwegian Petroleum Museum
Great was the rejoicing when A/S Norske Shell first refined its own crude in Norway in 1967, with the official opening of the new facility at Sola outside Stavanger taking place the year after.
— The Shell refinery at Sola. Photo: A/S Norske Shell/Norwegian Petroleum Museum
© Norsk Oljemuseum

The company had operated an import facility at the same site for many years, but could now produce aviation fuel, petrol, white spirit and various black oil products there.

Oil had gained a strong economic and strategic position globally after the Second World War. Norwegian heating oil and petrol consumption increased eight-fold and 3.5-fold respectively between 1938 and 1968.[REMOVE]Fotnote: Industridepartementet. (1965). Bygging av et oljeraffineri ved Stavanger. (St. meld. Nr. 95. 1964-65). Hentet fra https://www.stortinget.no/no/Saker-og-publikasjoner/Stortingsforhandlinger/Lesevisning/?p=1964-65&paid=3&wid=c&psid=DIVL1637

The postwar period in Norway was characterised by large-scale industrialisation, and the government was constantly eager to boost the pace of this development.

An active drive to inform and cultivate contacts was launched in 1959 under Labour politician and former UN secretary-general Trygve Lie to attract foreign industry to the country.

In this role, Lie had a number of meetings with Norske Shell and pressed actively for the Anglo-Dutch oil group to build its own refinery in Norway. The Norwegian Labour Party, which largely governed the country from 1945-65, had set a higher standard of living and greater social security as its most important goals.

Improved living standards for the population as a whole called for increased industrialisation and better access to foreign currency in order to afford more imported goods.[REMOVE]

Fotnote: Grønli, T. (1981), Den industripolitiske hovedlinje. I Pharo, Eriksen, Bergh, Pharo, Helge, Eriksen, Knut Einar, & Bergh, Trond. (1981). Vekst og velstand: Norsk politisk historie 1945-1965 (s. 101). (2. utg. ed.). Oslo: Universitetsforlaget.

Labour wanted a commitment to industries which used domestically-generated hydropower and Norwegian raw materials, and which also earned revenues from abroad. To achieve these goals, the party was willing on a number of occasions to give foreign capital better terms than domestic investors.

That was highlighted in 1956, when Esso sought to establish a Norwegian refinery which would allow it to import cheaper crude oil rather than refined products.

The government viewed this as such a significant national interest – including saving valuable foreign currency – that it was willing to make substantial concessions to Esso.  In the deal struck over building a facility at Slagentangen near Oslo, the US major received privileges with regard to corporate taxation.

Favourable depreciation rules as well as freedom from import tariffs on machinery from abroad and customs duties for the feedstock were also conceded.

The Labour government knew it was making a big commitment to establishing large-scale industry which could generate foreign exchange.[REMOVE]Fotnote: Industridepartementet. (1985). Om forhandlingene om bygging av et oljeraffineri i Norge. (St. meld. Nr. 17. 1957). Hentet fra https://www.stortinget.no/no/Saker-og-publikasjoner/Stortingsforhandlinger/Lesevisning/?p=1957&paid=2&wid=b&psid=DIVL901Opposition criticism that Norwegian capital was not receiving the same benefits as foreign sources were to no avail, since the government had a majority in the Storting (parliament).[REMOVE]Fotnote: Industridepartementet. (1985). Om forhandlingene om bygging av et oljeraffineri i Norge. (St. meld. Nr. 17. 1957). Hentet fra https://www.stortinget.no/no/Saker-og-publikasjoner/Stortingsforhandlinger/Lesevisning/?p=1957&paid=2&wid=b&psid=DIVL901

However, a significant point was made in the recommendation by the Storting’s standing committee on forests, watercourses and industry to the full assembly.

It noted that any future oil refineries built in Norway would have to receive the same terms as Esso on competition grounds.[REMOVE]Fotnote: Skog., vassdrags- og industrikomiteen. (1957). Innstilling fra Skog-, vassdrags- og industrikomiteen om forhandlingene om bygging av et oljeraffineri i Norge (Innst. S. nr. 72). (St.meld. nr.72). Hentet fra https://www.stortinget.no/no/Saker-og-publikasjoner/Stortingsforhandlinger/Lesevisning/?p=1957&paid=6&wid=a&psid=DIVL1328&pgid=a_0112: 4 Dette fikk stor betydning for etableringen av Shell sitt raffineri på Sola. That was to be very significant for the Shell facility at Sola.

After the Slagentangen refinery came on line in 1960, crude oil imports to Norway grew substantially. Approaches over similar projects were also made to the industry ministry by both Norsk Brændselolje A/S and Norske Shell.

The ministry replied that it was ready to start talks at any time on refinery construction. Norske Shell was even told on a number of occasions that the government would welcome this.[REMOVE]Fotnote: Industridepartementet. (1965). Bygging av et oljeraffineri ved Stavanger. (St. meld. Nr. 95. 1964-65). Hentet fra https://www.stortinget.no/no/Saker-og-publikasjoner/Stortingsforhandlinger/Lesevisning/?p=1964-65&paid=3&wid=c&psid=DIVL1637

An initial contact between the company and Sola local authority occurred as early as 1956, when Shell inquired about a possible site for establishing an oil refinery there.

As noted above, the company already had a depot facility at Risavika and was therefore not unknown to the local council. But it did not start a serious search for a site until 1960. A number of locations in eastern and southern Norway were assessed, with Brunlanes near Larvik and a site close to Kristiansand regarded as real options alongside Risavika.[REMOVE]Fotnote: Shell Internt (1993). nr. 4/93 april.

Alongside its assessments in Norway, Shell conducted similar evaluations elsewhere. The parent group decided in 1962 to build a refinery at Fredericia in Denmark.

While several factors underlay that choice, the company also said it would probably also invest soon in a Norwegian refinery if oil consumption continued to rise in Scandinavia.[REMOVE]Fotnote: Industridepartementet. (1965). Bygging av et oljeraffineri ved Stavanger. (St. meld. Nr. 95. 1964-65). Hentet fra https://www.stortinget.no/no/Saker-og-publikasjoner/Stortingsforhandlinger/Lesevisning/?p=1964-65&paid=3&wid=c&psid=DIVL16373.

The industry ministry received a formal application on 9 April 1965 from Norske Shell to build and operate an oil refinery at Sola. Risavika was chosen for several reasons, with optimum harbour conditions as the most important. Great weight was given to the guarantee of an ice-free port. Water and power supplies were no problem, either.

This was very welcome to both Rogaland county and Sola local authority. Their traditional fish processing and canning sectors were in decline, and the county was in great need of new industrial development.

Sola had little industry outside agriculture at the time. A few jobs were related to the armed forces and the airport. In other words, it needed industrial growth and a refinery would mean a substantial increase in activity for the region.

The number of new jobs would not necessarily be so great, but the spin-offs would come from using local suppliers. Shell could also guarantee that “in line with our normal practice, Norwegian citizens will be employed at the refinery to the extent that they can be obtained and possess the necessary qualifications […]”.[REMOVE]

Fotnote: Industridepartementet. (1965). Bygging av et oljeraffineri ved Stavanger. (St. meld. Nr. 95. 1964-65). Hentet fra https://www.stortinget.no/no/Saker-og-publikasjoner/Stortingsforhandlinger/Lesevisning/?p=1964-65&paid=3&wid=c&psid=DIVL1637: 3.

Shell negotiated reasonable land prices, while the local authority could offer exemption from port fees and water supplies at cost.

As determined in the Storting report on the Slagentangen refinery, Shell also received the same terms as Esso with regard to taxation and customs duties.

Local politicians in Sola were extremely pleased, and also got more than jobs in return. Facilities in both the local authority and Risavika were now to be upgraded.

As soon as Shell required it, the council would construct an asphalt road at the company’s expense from the national highway to the refinery. Shell would also pay for a parallel water main.

In addition, the company undertook to bear the cost of all facilities and equipment required to safeguard ship calls in its port area. For its part, the local authority promised to do its utmost to provide access roads.[REMOVE]

Fotnote: Rogalands Avis. (1964, 18. februar). Avtale mellom Shell og Sola om veg og vann til RisavikaThe most important component was a bridge over the Hafrsfjord.

A rail link from the refinery was also discussed, with Shell interested in distributing some of its oil products direct from the refinery in this way..[REMOVE]Fotnote: Stavanger Aftenblad. (1964, 11. november). Shell interessert i jernbane til Sola.

That project was quickly dropped.

Plans called for a “full range” facility, able to cover all products from aviation fuel, petrol and white spirit to various oil products. Owned by Norske Shell, it would have an annual capacity of two million tonnes of crude oil.

Construction began on 1 July 1965, Oslo tanker Rederinden delivered the first cargo of feedstock from Rotterdam on 24 October 1967, and production started on 29 December that year.

The official opening took place in 1968, and Shell could deliver petrol and other oil products to all south-western Norway. Heavy crude imported largely from Oman and Nigeria provided the feedstock.

Noise and fumes from the flare stack could be pretty unpleasant during the first few years. A new plant came on line in 1973 which reduced the noise, but the neighbours had to put up with sulphurous and acid fumes for a few more years.REMOVE]Fotnote: Stavanger Aftenblad. (1973, 23. mai). Lavere forurensning fra Sola-raffineriet.However, conditions eventually improved as the refinery converted to using lighter North Sea crude and a number of anti-pollution measures were introduced.[REMOVE]Fotnote: Gjerde, K., Grimstvedt, M., & Sola. (2003). I det regionale spenningsfelt: Sola energi 1913-1999. Sola: Sola kommune.: 89

The refinery project was unrelated to oil exploration in the North Sea.[REMOVE]Fotnote: Rogalands Avis. (1964, 10. juni). Oljeraffineri i Risavika kan dra nytte av oljefunn i Nordsjøen.

When Shell submitted its formal application for the plant to the government in 1964, the first licence awards on the Norwegian continental shelf (NCS) were still a year in the future.

What mattered to the company was securing its own refinery to meet demand. It had about a quarter of the market in Norway and expected consumption to grow substantially.

Nevertheless, the Sola facility could soon utilise feedstock from virtually its own neighbourhood. Ekofisk became the first commercial Norwegian offshore discovery in 1969, and Shell had the honour of refining the first oil produced from the NCS.

The initial consignment of North Sea crude arrived in Risavika from Ekofisk on 4 August 1971. Over the decade from the late 1970s, Statfjord was the main source of feedstock for the refinery and oil from Troll also began to arrive in 1995.

The Sola refinery was constantly modified to optimise the process and keep operating costs down. Annual capacity rose from 2.5 to three million tonnes of crude in 1973, for example.

In 1979, a new control centre was established and new plants for crude oil distillation and petrol production were upgraded in 1986 to save energy.

Product types changed, with new ones being added while others were dropped. The biggest changes occurred with petrol grades, particularly when unleaded varieties were introduced.

A new facility for the latter was built in 1990 along with other environment-related investments. Ever-tougher environmental standards in the 1980s and 1990s also called for new equipment.

As recently as 1995, Norske Shell invested NOK 200 million in the refinery to automate and simplify work processes and to reduce maintenance costs. Excess refinery capacity in Europe increased during the 1990s, while the EU tightened its environmental standards. Although the Sola plant was ultra-modern, profitable and efficient, Shell decided in 1999 to shut it down.

It was the group’s smallest European refinery, but also the most profitable. However, Norske Shell ultimately accepted a strong recommendation from the management of Shell Europe Oil Products (SEOP) to cease operation. The last tanker-load of crude oil arrived at the refinery in February 2000, and the flare was extinguished on 17 April that year.

Over its 32 years in operation, the refinery had received 60 billion litres of crude and produced 15 billion litres of petrol.[REMOVE]Fotnote: Gjerde, K., Grimstvedt, M., & Sola. (2003). I det regionale spenningsfelt: Sola energi 1913-1999. Sola: Sola kommune.

Published May 25, 2018   •   Updated May 25, 2018
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Completing and installing

person Finn Harald Sandberg Norwegian Petroleum Museum
Mating the concrete support structure and topsides for the Draugen facility and installing it on the field were not entirely without complications.
Mating and tow-out.
— The topside is with great precision placed on top of the GBS. Photo: Dag Magne Søyland/Norwegian Petroleum Museum
© Norsk Oljemuseum

To start with, the platform ranked at the time as the tallest structure ever towed. It was also the first fixed installation to be positioned above the 62nd parallel – making the tow-out the longest to date on the Norwegian continental shelf (NCS).

bygging av betongdelen til plattformen, plattformen plasseres på feltet, forsidebilde
The GBS raises high against the sky where it is located in Yrkjefjorden, soon ready to be mated with the topside. Photo: A/S Norske Shell/Norwegian Petroleum Museum

The Condeep monotower was readied in March 1993 to receive the topsides, which were to be towed from Stavanger to the deepwater mating site at Vats.

On 24 March, the concrete structure underwent a trial submersion which left only a few metres of the shaft visible above the sea surface.

This operation was a nervous time, with the Sleipner sinking (see separate article) the year before still fresh in the minds of most people present. But everything went as planned.

plattformen plasseres på feltet, engelsk,
The topside is placed on two huge barges and towed to Vats by five tugs. Photo: A/S Norske Shell/Norwegian Petroleum Museum

In the meantime, the topsides were being completed at Stavanger’s Rosenberg Verft yard. On 6 March, this structure was transferred to two huge barges and towed to Vats by five tugs.

bygging av betongdelen til plattformen, engelsk, plattformen plasseres på feltet,
The topside was mated with the GBS in Yrkjefjorden 26.03.1993. Photo: Dag Magne Søyland/Norwegian Petroleum Museum

Mating was accomplished by manoeuvring the barges into position over the concrete shaft and deballasting the gravity base structure (GBS).

Tolerances were narrow. The maximum permitted deviation from an ideal match of topsides and shaft was a mere 40 millimetres – so accuracy was essential in all stages of the operation.

As large volumes of water were pumped from its storage cells, the GBS rose, took over the weight from the barges and continued to raise the topsides high above the sea surface.

The mating operation was completed entirely to plan, and all that remained before the platform could begin its journey north was to hook up piping and cable systems.

bygging av betongdelen til plattformen, plattformen plasseres på feltet, utslep, engelsk,
Draugen being towed from Yrkjefjorden to the Draugen field on Haltenbanken. Photo: Dag Magne Søyland/Norwegian Petroleum Museum

In beautiful weather, the tow-out began on 3 May. Six big tugs with a combined 75 000 horsepower in bollard pull were needed to cover the 830 kilometres to the field.

As mentioned above, this was the longest-ever tow for a Condeep platform. Completing the voyage without risk depended more than ever on a long period of fine weather.

The operation took 10 days at an average speed on 1.5 knots. It crossed the 62nd parallel – the northern boundary of the North Sea – at 04.58 on 11 May, and reached its destination on 13 May.

The platform was finally in position on 17 May, Norway’s Constitution Day, and an improvised parade was staged on the helideck.

Installation on the field

rov-arbeid inni draugen, forsidebilde, slep, engelsk,
The Draugen platform being towed to the field offshore. Photo: A/S Norske Shell/Norwegian Petroleum Museum

Some concern was expressed when the tow began in early May because an error in casting the GBS had created a problem for ballasting the platform down on the field.[REMOVE]Fotnote: Interview with Eivind Wolff, Norwegian Contractors project director, 20 October 2016.

Extensive seabed surveys and geotechnical sampling had been conducted on Draugen as early as 1992. These revealed that the platform site comprised very soft clay over a harder layer.

As a result, the platform was equipped with nine-metre long skirts to ensure good penetration. However, their thick walls would displace much of the unconsolidated seabed material.

plattformen plasseres på feltet, engelsk,
Figure 1

This soft clay would be squeezed into all the spaces beneath the storage cells, including the three-cornered gaps formed when three cylinders are placed next to each other (see figure 1).

Unfortunately, an inspection had revealed that these supposed three-cornered spaces were not empty but had been filled with concrete.

This meant the seabed material had nowhere to go when the skirts penetrated. That could cause a soil collapse, damaging the whole platform foundation and perhaps leaving it unusable.

The casting error and poorer bottom conditions than expected meant that the tolerance for positioning the GBS had to be narrowed from a diameter of 20 metres to just eight metres.

Sigbjørn Egeland, Shell’s construction supervisor for the GBS, sums up what happened as follows:

When the platform had bee placed just two metres from the ‘bull’s eye’, the job of ballasting down began to ensure adequate skirt penetration in the seabed. This would normally have been a relatively straightforward process – simply pumping water out of the storage cells so that external water pressure would drive the structure into the seabed. The skirts had almost reached full penetration when we were informed that only half of them were in contact with the hard layer. The soft clay overburden was thicker than expected and the hard layer sloped slightly. This sparked an extensive and hectic series of meetings to find a solution to the unexpected discovery. To achieve a solid ‘landing’ and ensure a good grip on the hard clay by the remaining parts of the skirts, the platform had to be positioned ‘slightly askew’.[REMOVE]Fotnote: E-mail from Sigbjørn Egeland, Shell’s construction supervisor for the concrete GBS, 14 February 2017.

This proved very challenging. The solution adopted was to adjust the internal underpressure in the cells. But that created pressure differentials on different sides of the platform.

The was process very extensive and difficult. Nobody had done anything like it in practice before, and calculating the amount of pressure differential was complicated.

Things had to done calmly and carefully, and took at least a week longer than a normal installation. The result was that the platform had a tilt of about 0.3 degrees (“I think the exact figure was 0.296 degrees,” says Egeland).

That might not seem like much, but on a structure more than 300 metres tall it adds up to a horizontal offset of about 1.5 metres. The lifts and the derrick had to be adjusted accordingly.

Those who complained most were the pool players – all the balls accumulated in one corner.[REMOVE]Fotnote: Interview with Bjarne Jensen, Shell’s survey representative for installation of the Draugen platform, 11 October 2016.

Published May 14, 2018   •   Updated October 10, 2018
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The Condeep story

person Finn Harald Sandberg Norwegian Petroleum Museum
When Norway became an oil nation in the late 1960s, few people expected Norwegian construction companies to be among the biggest suppliers to the forthcoming North Sea developments.
— The construction is just starting in the dry dock in Jåttåvågen near Stavanger, where Draugen will be built. Representatives from the construction client start by releasing the first concrete from the concrete bucket. Photo: Norwegian Contractors/Norwegian Petroleum Museum
© Norsk Oljemuseum
om å jobbe på glid, parkering, jåttåvågen,
A lot of people participated during the large Draugen slipform in Jåttåvågen. Photo: Norwegian Contractors/Norwegian Petroleum Museum

The formation of Norwegian Contractors (NC) in 1973 as a joint venture between A/S Høyer-Ellefsen, Ingeniør F Selmer A/S and Ingeniør Thor Furuholmen A/S nevertheless demonstrated that the country had its own resources for meeting the big new challenges.

This became particularly clear through a unique creation – the concrete deepwater structure (Condeep) to support production facilities on the continental shelf.

These gravity base structures (GBSs), which sit solidly on the seabed through their own weight, introduced prestressed concrete as a construction material for the offshore sector.

They combined a number of technical advantages with a short construction time and low lifetime costs, and thereby represented big savings for the oil companies.

Norwegian Contractors

NC’s development can be split into three phases, starting in 1973 with the contract to build the first Condeep for Mobil’s Beryl A platform in the UK North Sea sector.

The initial five years were a typical pioneering period, where attention was concentrated on delivery and less concern was paid to further development.

This period ended with the delivery of the GBSs for Statfjord A and the TCP-2 platform to stand on the Frigg field in the course of 1977.

The next phase covered 1978-88 and embraced the construction of six Condeeps – all for licences operated by Norwegian companies.

It was now the government demanded that it must be possible to remove concrete platforms from the fields when production had ceased. All Condeeps had to be designed accordingly from 1980.

The final phase began in 1988 with the start to constructing the first Sleipner A GBS and ended with the delivery of the Troll A platform in 1995.

NC made a big leap forward technologically during this period by introducing several new platform solutions simultaneously, both fixed and floating.

Water depths down to 300 metres represented a particular challenge, and the Draugen GBS marked an important product in this context.

The Sleipner A GBS sank in the Gands Fjord in April 1991 (see separate article). This had consequences for the whole of NC and posed challenges for the Draugen, Troll and Heidrun platforms.

Condeep

Many people contributed to the development of the Condeep concept. Three who were particularly important in this context are mentioned here.

Engineer Olav Mo came up with the idea for the structure, and played a big role in its technical refinement. He later applied for a patent covering the design.

Helge Molland was the executive responsible for developing collaboration with other companies and for the active market cultivation required to succeed with such a pioneering project.

His enthusiasm and ability to put the case allowed him to make a big contribution in the demanding initial period.

Dr techn Olav Olsen was Norway’s leading expert on shell structures and involved in the development work from the word go. He produced the final solution used for Beryl A and played a highly significant part in subsequent designs.

Olsen won international recognition with the award of the Gustave Magnel gold medal for the Draugen platform design in 1991.

Construction

Many people earned their first oil money and financed their studies through long summer days on and beside the Gands Fjord, where these concrete gravity base structures (GBSs) were raised by a process known as slipforming. Stout backs and strong arms were required to build these huge structures. One experience is described below.

Some of these workers have also regarded their experience of the platforms and constructing them as the great challenge of their lives.

One of these was Swede Gunnar Gramnes, who wanted to give the Norwegian oil adventure a try during the summer of 1986 and has provided the following account (abridged).

“There were 1 200 of us. We came from Cameroon, Angola, Czechoslovakia, Canada, Poland, West Germany and the UK, and naturally from Finland, Denmark, Norway and Sweden.

“We included experienced old construction workers, who got the jobs they wanted, young people who had fled unemployment at home, university students and a few expectant adventure-seekers.

“There were almost as many different reasons for being there as there were souls. But we all shared two motives – to make money and to participate in the world’s biggest slipforming operation to date.

“I was personally one of the adventure-seekers. That’s how it felt, at least, when I boarded the train at Stockholm’s central station for the 17-hour journey to Stavanger.

om å jobbe på glid, jåttåvågen, engelsk
Workers on top of the slipform look small compared to the giant concrete construction. Photo: Norwegian Contractors/Norwegian Petroleum Museum

“Pouring concrete was my job, and God knows I did enough of it. The old office-worker body suffered a real shock after its first shift – eight hours of continuously pushing a wheelbarrow with 150 kilograms of concrete.

“This went on round and round a scaffold inside cell E4. When the chance came for a break after four hours of intensive work, I ached everywhere and was convinced that the adventure would end after a single shift.

“The mood in cell E4 was high-spirited throughout that summer. I was lucky, and worked only with Norwegians. And I’ll never forget my eight cell comrades.

“A great camaraderie developed between us as we struggled with or against the ever-rising formwork, which climbed remorselessly at its fixed rate of 53 centimetres per shift.

“I managed to complete my 12 regular shifts, and even an extra one, and returned home from Stavanger considerably stronger and with greater self-confidence than ever.

“Whenever I tell curious colleagues about my days on the ‘slip’, I feel a sense of pride – over surviving the big strength test, over the good camaraderie, over learning about other working lives remote from my own.

om å jobbe på glid, parkering, jåttåvågen, engelsk
Draugen's concrete fundament is starting to take shape. Photo: Norwegian Contractors/Norwegian Petroleum Museum

“And I’m proud of having been involved with the fantastic structure which an oil platform represents.”[REMOVE]Fotnote: Steen, &., & Norwegian Contractors. (1993). På dypt vann : Norwegian Contractors 1973-1993. Oslo: [Norwegian Contractors].

Working on the slip has also inspired poetry of the kind written by Erling Thu and included in his 1976 collection of Condeep Kvardagsdikt (Everyday Condeep Verses). See the Norwegian version of this article for an example.

Published May 14, 2018   •   Updated October 4, 2018
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The Sleipner sinking and Draugen

person Finn Harald Sandberg, Norwegian Petroleum Museum
The concrete gravity base structure (GBS) for the Sleipner A platform sank to the bottom of the Gands Fjord outside Stavanger during a test submersion on 23 August 1991.
— Sleipner in the Gandsfjord. Photo: Unknown/Norwegian Petroleum Museum
© Norsk Oljemuseum
Sleipner-havariet og Draugen, engelsk,
The Draugen platform during building in August 1991 Poto: Eivind Wolff/Norwegian Petroleum Museum

Construction of the Draugen platform was in full swing at this time. The immediate question was whether the same fate could befall its GBS.

Was there a weakness in the Condeep design which had so far gone undetected or failed to show up, or was this unknown fault confined to the Sleipner A structure?

The sinking was heralded at 05.49 with a loud report from inside the GBS, followed by two smaller bangs, and a substantial leak was immediately registered.

Continuous measurement by the control room established that almost 1 000 tonnes of water per minute were flowing into the drilling shaft.

The ballast pumps were immediately started, but the was much greater than they were designed to handle. About 18 minutes later, the GBS went to the bottom. That was long enough for the 22 people on board to escape without injury.

On its way down, the GBS imploded and all air in the storage cells was expelled. That created a tsunami effect so powerful that two tugs lying close to the structure lost sight of each other.

Sleipner A hit the seabed with great force in just under 200 metres of water.[REMOVE]Fotnote: Intervju med Einar Wolff, NCs prosjektdirektør for Draugen. Tremors from this impact were measured by several seismological stations (figure 2).

Sleipner-havariet og Draugen
"Sleipner to the bottom" from Stavanger Aftenblad 23.08.1991

An investigation of the remains revealed that the GBS was completely destroyed, with remains scattered over a wide area in 170-220 metres of water.

Appointed almost immediately after the incident, a commission of inquiry led by operator Statoil sought to identify the cause of the sinking.

Builder Norwegian Contractors (NC) also established an internal investigation, which reached the same main conclusion as the other group.

This was that the concrete wall fractured because the connection points between the cells – known as the tricell (figure 3) – had been insufficiently dimensioned.

That in turn reflected errors which had arisen in the finite element analysis of the structural strength of the GBS.

NC commissioned a full-scale model trial which checked eight test sections. This work confirmed the causes identified by the engineers.[REMOVE]Fotnote: Steen, &., & Norwegian Contractors. (1993). På dypt vann : Norwegian Contractors 1973-1993. Oslo: [Norwegian Contractors].

The Sleipner GBS sinking also touched off a small earthquake at Shell, but actually had few consequences financially or in terms of progress.

As early as the day of the incident, NC representatives visited Shell’s offices to explain that it was probably caused by under-dimensioning of tricells.

Sleipner-havariet og Draugen, engelsk
Olav Olsen. Photo: Unknown/Norwegian Petroleum Museum

That in turn reflected inaccurate use of computer programmes at consultant Olav Olsen. Worse – the same error had been made on the Draugen GBS.

The news came as a powerful blow to Sigbjørn Egeland, Shell’s lead manager for construction of the Draugen GBS. “Until then, I’d had boundless confidence in NC,” he says.[REMOVE]Fotnote: Intervju med Sigbjørn Egeland, Shells hovedansvarlig for betongunderstellet til Draugen.

Shell initiated independent analyses, both in-house and externally, while work on the GBS was put on hold until the results were available.

After about three months, Shell got the same answers NC had obtained through its model trials and the construction process could be resumed.

As a result, the impact of the sinking was limited. The really significantly financial consequences arose from the ringing problem (see separate article).

“The principal effect of the Sleipner incident was that I lost a lot of my confidence in the supplier,” recalls Egeland. “From then on, it became necessary to test all the important conclusions with independent experts.”

Sleipner-havariet og Draugen, bygging, slep, engelsk,
Draugen's concrete fundament is being towed to Vats, a deeper fjord. Photo: A/S Norske Shell /Norwegian Petroleum Museum

Published May 14, 2018   •   Updated October 2, 2018
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Skirt piling

person Tor Ole Olsen, Dr techn Olav Olsen AS
When oil and gas production moved into deeper waters, the loads on gravity base structures (GBS) used to support platforms increased.
— November 1990, Draugen's concrete skirt is taking shape. Photo: Eivind Wolff/Norwegian Petroleum Museum
© Norsk Oljemuseum

Where seabed soil strength was also weaker – on soft clays, for example – the foundation challenge became fairly considerable.[REMOVE]Fotnote: Alm, T., Bye. A,, Sandvik, K. & Egeland, S. (1995). The Draugen Platform and Subsea Structures, Installation and Foundation Aspects. Paper presentert på OTC 7670-MS OTC Conference.

skjørtpeling, illustrasjon, engelsk
An artist impression of Draugen's concrete skirt and storage cells. Illustration: Unknown/Norwegian Petroleum Museum

Olav Olsen, Norway’s leading expert on shell structures, regarded the skirt pile as a tool for overcoming this problem.[REMOVE]Fotnote: Steen, &. (2002). Den frie tanke : Om kreativ frihet og en ledende norsk ingeniør. Lillestrøm: Byggenæringens forl. It surrounded and enclosed the weakest top layer of clay and transferred the load to deeper and more stable levels.

Clay also has a tensile strength which can help to counter the burden of short-term loads such as breaking waves.

A steel skirt had been incorporated beneath the storage cells on a number of earlier Condeep concrete platforms to ensure stability. The steel skirts are suitable for sandy soils.

Gullfaks C was the first of these installations to feature an integrated concrete skirt, which thereby formed an extension of the cylindrical cell above and naturally had to cope with the loads placed on it.

But questions were posed from certain quarters about the suitability and strength of these skirts, including a British consultant who warned Gullfaks C operator Statoil against them.

Olav Olsen’s company invited this critic to a meeting where a Statoil representative was also present along with Olsen himself and his son Tor Ole Olsen.

The British visitor had prepared well, bringing with him a suitcase full of modelling clay and the cut-off bottoms of plastic bottles (which had appropriately held various oil products).

skjørtpeling,
Olav Olsen. Photo: Unknown/Norwegian Petroleum Museum,

By pressing a bottle base into the clay, he was able to demonstrate that the skirts deformed severely. The side of the bottle bent as the pressure increased.

With a doctorate on shell structures and the insight and experience conferred by many years of development work, Olsen immediately saw that the plastic bottles lacked an important component – stiff wall-bottom connection.

He demonstrated this by taking one of the cut-off bottles, filling clay into the bottle bottom to stiffen the wall and then pressing it down on more clay. The skirts (bottle sides) now retained their shape.

Olsen had thereby used the critic’s own toolkit to demonstrate the applicability of the skirts, and the British consultant’s warnings were silenced.

The Gullfaks C, Draugen and Troll A platforms all incorporate long skirt piles, and all have operated on the Norwegian continental shelf for more than 20 years.

The skirts on Draugen are 16 metres high and penetrate nine metres into the seabed. Their construction in the dry dock at Hinna in Stavanger is clearly illustrated in figure 2.

skjørtpeling
Photo: Eivind Wolff/Norwegian Petroleum Museum

Published May 14, 2018   •   Updated October 2, 2018
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The ringing phenomenon

person Finn Harald Sandberg, Norwegian Petroleum Museum
Model tests with the Heidrun tension-leg platform found that large irregular waves created oscillations which had a big impact on total tension in the tethers. The effect is termed “ringing”.
— Stormy weather at Draugen. Photo: A/S Norske Shell/Norwegian Petroleum Museum
© Norsk Oljemuseum

 

ringing-fenomenet, engelsk,
Heidrun. Photo: Harald Pettersen/Equinor

Uncertainty over whether this would also occur on the Draugen platform prompted hectic activity at both operator Shell and Norwegian Contractors, builder of the concrete gravity base structure (GBS).

Put simply, the ringing effect described oscillations which arose in the tethers mooring Heidrun’s floating concrete support unit to the seabed when it was subject to large and uneven wave forces.

In the Draugen case, the concern was that a similar phenomenon might cause deflections in the single topside support shaft which increased loads on the concrete and reinforcement.

Slipforming of the Draugen monotower was actually halted while model trials were conducted to assess how important the ringing phenomenon might be.

A rather more comprehensive and technical explanation is that this represents a non-linear effect which arises when steep waves strike the vertical surfaces on a structure.

This is a short-lived reaction which particularly affects the splash zone – the area alternately above and below water as waves rise and fall.

The effect gets its name because the oscillations created are similar to those experienced when a church bell is set in motion.[REMOVE]Fotnote: Intervju med Eivind Wolff, NCs prosjektdirektør for Draugen-prosjektet. Av Finn Harald Sandberg, Norsk Oljemuseum.

ringing-fenomenet, mars 1993, engelsk,
The top part of Draugen GBS is square shaped. Photo: Eivind Wolff/Norwegian Petroleum Museum

Since the hydrodynamic mechanism which causes ringing is still not fully understood, model trials continue to be recommended to determine the relevant load.

Such tests were initiated for the Draugen platform at a specialist lab in Denmark as a result of the Heidrun experience. Calculations also sought to simulate what might happen with the Draugen structure under the relevant conditions.

The platform’s slim support shaft is topped by a transition piece which converts a circular cross-section into a square shape. That places four big vertical surfaces above the sea surface and immediately beneath the topsides.

Model testing showed that when a particularly high (100-year) wave hit such a surface, the shaft experienced an extra loading which transmitted extreme forces – up to 70 per cent greater than those previously calculated – down its structure.[REMOVE]Fotnote: Intervju med Eivind Wolff, NCs prosjektdirektør for Draugen-prosjektet. Av Finn Harald Sandberg, Norsk Oljemuseum.

ringing-fenomenet, storm, engelsk,
Stormy weather/Photo: A/S Norske Shell/Norwegian Petroleum Museum

The immediate problem on Draugen was overcome by extending the circular section of the shaft a further four metres, so that the big surfaces were less exposed to high seas. That also helped to resolve the problem of waves hitting the base of the topsides.

It transpired that the predicted impact was smaller than had been feared after the initial model tests on Heidrun. Two reasons accounted for this.

  1. Ringing reduces with larger dimensions. A model will accordingly show a much bigger effect than a full-scale structure. This primarily reflects the impossibility of simulating the real speed of shock waves in model trials.
  2. The effect on a cylindrical or conical tower will also be smaller because the waves strike a smaller surface (decrease with reduced diameters) than with the rectangular areas found in parts of the Heidrun support structure. In addition, Heidrun’s four tethers produce bigger oscillations than the single shaft used on Draugen.[REMOVE]Fotnote: Intervju med Torvald Sande. Abv Finn Harald Sandberg, Norsk Oljemuseum. 

Slipforming the concrete monotower for the Draugen GBS had been halted for three months in anticipation of these results, but this structure was not on the critical path anyway.

A bigger problem was presented by the cost of the required changes. Not only were more steel and concrete needed, but the internal outfitting of the shaft was affected by the added height.

Ringing is described as a transient response – in other words, it increases very rapidly and then declines rather more slowly depending on how the oscillations damp down. The oscillations are caused by a powerful load impulse, which acts like slamming (the same effect as a hard punch). But this is not the same as the effect caused in air by shock waves (such as aircraft breaking the sound barrier). It is manifested primarily by extreme values – like 100-year waves – although these also contribute to fatigue. Ringing is not significant for fatigue since powerful episode are infrequent. Næss, A. & Moan, T. (2013) Stochastic Dynamics of Marine Structures.

 

Kumar, A. & Kim, C. H.  (2002). Ringing of Heidrun TLP in High and Steep Random Wave. International Journal of Offshore and Polar Engineering vol 12, no 3.

Fames, K. (1996).  Computer Efficient Ringing Analysis of the Heidrun TLP. Paper presentert på Sixth International Offshore and Polar Engineering Conference, 26-31 May. Los Angeles, California, USA.

Published May 14, 2018   •   Updated October 9, 2018
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The unique Draugen platform

person Finn Harald Sandberg Norwegian Petroleum Museum
Shell declared the Draugen field commercial in May 1987. It had then assessed many different platform solutions since the second appraisal well in August 1985.
— Illustration: A/S Norske Shell/Norwegian Petroleum Museum
© Norsk Oljemuseum

Four options remained for further consideration in May 1986. These were:

  • a fixed concrete platform with integrated topsides
  • a semi-submersible platform with attached storage ship
  • a weather-adapted monohull production floater with possible oil storage and offloading (FPSO)
  • two converted drilling rigs.

This quartet was then subjected to a year of further detailing and comparison with the implementation plan, the economics of the project, general operations optimisation and key uncertainties with the proposed technology. All the options had to satisfy the same operational assumptions in terms of production capacity, wells and transport capability.

While Shell considered various solutions – floater, steel jacket (support structure), gravity base structure (GBS) and so forth – Norwegian Contractors (NC) promoted its concrete option.

After all, this construction company could point to great success during the 1970s and 1980s with its Condeep design, not least on the Statfjord and Gullfaks fields. NC construction manager Dag N Jensen recalls the process:

 

plattformen et unikt konsept, engelsk,
Olav Olsen. Photo: BP Norge A/S/Norwegian Petroleum Museum

Then Shell called me – I think it was Serge Leijten­ – to say that they had now decided that a semi was the best option. We, in other words NC, could not give up that easily, so I told Shell there and then that we had a better solution and agreed to meet the company in Stavanger at 08.00 the following day. I talked with Tor Ole Olsen at the Dr Techn Olav Olsen consultancy, and we agreed to create a monotower platform. Olav Olsen calculated and calculated, Tor Ole put the drawings in my letterbox during the night and I took the first flight to Stavanger the next day to present the drawings to Shell with some verbal cost and planning estimates. This aroused such great interest that the company revised its choice of concept, asked for further documentation, and ended up going for a GBS.[REMOVE]Fotnote: E-mail fra Dag N.jensen 26.04.2016

In other words, this solution represented an improved but not final version of the concept presented in the plan for development and operation (PDO) of Draugen. While a monohull FPSO basically represented the cheapest option, a fixed structure was recommended because it best satisfied Shell’s stated reliability and storage requirements. An economic analysis also showed that a fixed installation yielded the best internal rate of return on the huge investment involved.[REMOVE]Fotnote: Draugen Field Plan for Development and Opreation Appendix VI Concept Selection

The cheapest of the fixed concrete GBS solutions, ranging from one to four support shafts, was the monotower. This also provided sufficient support for the topside design and room for 10 wells to be conducted to the process facilities.

plattformen et unikt konsept, på trykk tk 23.09.1987, engelsk
A/S Norske Shell's Vice President, Paul Skinner (left), and Director for exploration and production, Wim Steenken (right), together with the oil and energy minister Arne Øien. Photo: Tidens Krav/Norwegian Petroleum Museum

At the same time, it became important to demonstrate that drilling wells and producing oil simultaneously through a single shaft fell within the required safety margins.

Calculations indicated that the risk of accidents with a monotower solution did not differ significantly from alternative solutions with several shafts.

In addition, these assessments showed that the level of risk for simultaneous drilling and production was the same for the various designs.[REMOVE]Fotnote: Draugen GBS Shaft Safty Study (report No. ST-91-CR-018-01 SikteC A/S august 1991

The concrete structure was required to support a topside weight of 22 000 tonnes and to store a million barrels of crude oil.

Submitted in September 1987, the PDO for Draugen was approved by the Storting (parliament) on 19 December the following year.

plattformen et unikt konsept, bygging, engelsk,
The concrete skirt was built in Jåttåvågen and Gandsfjorden. Photo: Tidens Krav/Norwegian Petroleum Museum

Shell wanted to try to avoid NC – the sole supplier of concrete GBSs to date – being its only option. An attempt was therefore made to create competition.

Peconor, a group comprising several companies including Sweden’s Skanska, was accordingly invited to submit a bid for building the structure.

The original version was presented, but the consortium was challenged to come up with an optimised design (as NC had already done). It transpired that the final bid from NC was far below the Peconor offer, allowing the former to retain its monopoly of building large concrete platform support structures.

The concept of a monotower GBS was not entirely new. It had been proposed as early as 1975 for Norway’s Heimdal field in the North Sea,[4] which was eventually developed with a jacket solution.

Once the PDO had been submitted, work began on optimising the GBS. This found that cylindrical components could be built with larger diameters. The earlier view had been that such shell structures could not have a diameter above about 30 metres. Any increase meant it would be unable to float on the shaft alone while building lower storage cells with sufficient volume.

In addition, the length of the skirt piles (the part of the GBS which would penetrate into the seabed) was increased in order to improve the structure’s resistance to wave motion (see separate article).

plattformen et unikt konsept, slep, engelsk,
Towing Draugen to Vats. Photo: A/S Norske Shell/Norwegian Petroleum Museum

So the big monotower provided the buoyancy needed by the platform at tow-out to the field while consuming considerably less concrete in terms of both volume and weight.

Another advantage was that the water depth along the tow-out route was very favourable in relation to the GBS height, allowing a relatively low freeboard during the operation. That ensured good stability and safety.[REMOVE]Fotnote: Steen, &. (2002). Den frie tanke : Om kreativ frihet og en ledende norsk ingeniør. Lillestrøm: Byggenæringens forl.: 110-112.

Published May 14, 2018   •   Updated October 9, 2018
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Medal award for Draugen design

person Finn Harald Sandberg Norwegian Petroleum Museum
Consulting engineer Olav Olsen was presented in 1994 with the highly regarded Gustave Magnel gold medal on the basis of his work with the concrete gravity base structure (GBS) for Draugen.
— Photo: Heine Schjølberg
© Norsk Oljemuseum

This followed an initiative by Professor Rolf Lenschow at the department for construction technology of the Norwegian Institute of Technology (now the Norwegian University of Science and Technology). He proposed to the Norwegian Concrete Association at the beginning of January 1994 that Olsen should be nominated for this honour.

The association submitted an official application on 13 January to Belgium’s Association of Ghent University (AIG) Foundation, the secretariat for the award jury.

Established in 1959, the Gustave Magnel medal goes to the designer of a structure in reinforced or prestressed concrete which is regarded as both important and innovative. It was created to honour Magnel, who had developed a new method for prestressing concrete during the Second World War, and is awarded every five years to a design and its originator.[REMOVE]Fotnote: Steen, &. (2002). Den frie tanke : Om kreativ frihet og en ledende norsk ingeniør. Lillestrøm: Byggenæringens forl.

Gustave P R Magnel was born in 1889 and graduated from Ghent University in 1912. He emigrated to the UK during the First World War, but returned to the university in 1919 and established his own laboratory for concrete research in 1926.

Appointed a professor in 1937, he authored a number of books and more than 200 professional papers as well as teaching until his death in 1955.

He also practised as a engineer/consultant. Among other jobs, he had principal responsibility for the design and construction of America’s first prestressed concrete bridge – the Walnut Lane Memorial Bridge in Philadelphia, Pennsylvania.

Gustave Magnel-medaljen, engelsk
Walnut Lane Memorial Bridge in Philadelphia. Photo: Helen P. Ross, HAER. - Historic American Engineering Record
Gustave Magnel-medaljen, engelsk
Olav Olsen to the right. Photo: Unknown/Norwegian Petroleum Museum

It became known in early September 1994 that the gold medal was to be awarded to Dr Olsen for his contribution to the Draugen platform.

The presentation ceremony on 25 November noted the recipients long and significant commitment to the use of reinforced concrete in shell structures.

Particular emphasis was given to his involvement in the creation of the Condeep GBS concept, and particularly his development of skirt piling.[REMOVE]Fotnote: Omtalen ved tildelingen 25.11.1994

Although Troll A is the tallest GBS, many people regard the Draugen platform as an equally impressive technological masterpiece.

It was the first fixed offshore production facility beyond the northern boundary of the North Sea, and is perhaps one of the boldest but also most elegant of the Condeep solutions.

With its slim conical monotower support column, it ranks in addition as a very efficient and attractive structure.

The contract for the platform was signed with Norske Shell in the autumn of 1989, when Dr Olsen was 76 years old and still worked every day in his own consultancy (which continues to bear his name in 2018).[REMOVE]Fotnote: Steen, &. (2002). Den frie tanke : Om kreativ frihet og en ledende norsk ingeniør. Lillestrøm: Byggenæringens forl.

Among other winners of the Gustave Magnel medal, particular mention should perhaps be made of Germany’s Fritz Leonard, who received the honour in 1968.

He is also the designer of the Helgeland Bridge, completed in 1991, which was acclaimed by engineering weekly Teknisk Ukeblad as Norway’s most beautiful bridge in 2010.[REMOVE]Fotnote: Øderud, H.T. (2013). Helgelandsbrua. Store norske leksikon. Hentet fra https://snl.no/Helgelandsbrua

Gustave Magnel-medaljen, engelsk
Burj Kahlifa in Dubai. Photo: Nepenthes (CC BY-SA 2.5)

The most recent winner is William Baker, who received the medal in 2014 for his unique design and development of special structural elements which permitted the construction of the Burj Khalifa, the 828-metre Dubai skyscraper ranked as the world’s tallest building.[REMOVE]Fotnote: Burj Khalifa. Facts & Figures. Hentet fra http://burjkhalifa.ae/en/the-t.

Published May 14, 2018   •   Updated October 9, 2018
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Political management of Norway’s oil sector

person Finn Harald Sandberg Norwegian Petroleum Museu
Activity on the Norwegian continental shelf (NCS) had become so large by the early 1980s that key politicians were concerned it could damage other industries in Norway. Several decisions by the Storting (parliament) were to affect planning and design for Draugen.
— Sunset at the Ekofisk centre. Photo: Harry Nor-Hansen/Norwegian Petroleum Museum
© Norsk Oljemuseum

Tempo commission

The government appointed a commission of inquiry on 5 March 1982 to assess the future scope of petroleum operations on the NCS.[1] This became known as the “tempo commission”.[2] Chaired by Hermod Skånland, deputy governor of Norges Bank, it was to report to the Ministry of Petroleum and Energy (MPE).

When explaining the appointment of the commission, the government pointed to the political consensus on maintaining a moderate pace of production on the NCS.

Such a pace had been “defined” in 1974 as 50-90 million tonnes of oil equivalent (toe) or 375-675 million barrels (boe) per annum. That corresponded to an average daily output of 1-1.85 million boe.

The higher figure had been proposed by the Labour government’s finance minister, while the lower was backed by the Storting opposition.

A White Paper from the finance ministry in 1974 calculated that annual output in 1981-82 would be 670 million barrels and would then decline from known fields.[3] (It might be noted in passing that peak output from the NCS, achieved in 2004, was 1 662 million toe.[4])

Offentlig styring av oljevirksomheten, engelsk,
At the completion of the deck to Statfjord B, there were more than 3,000 persons working at Rosenberg shipyard in Stavanger. This image is from a shift, where it was often crowded in the stairs between the floors. Photo: Rein Øverland / Norwegian Oil Museum

In 1982, the workforce in the petroleum sector as such accounted for a mere 0.5 per cent of overall Norwegian employment and just one-fortieth of all industrial jobs.

But people were concerned that even limited changes in oil activity would have a substantial impact on other parts of the national economy.

During the 1970s, the petroleum sector had given an important stimulus to elements of Norwegian industry at a time when international economic development was weak.

It was seen that this had led to the acquisition of expertise which could lay the basis for new production and exports. But worries were nevertheless expressed that oil operations could divert key personnel from other industries.

An important element in the tempo commission’s mandate was an emphasis (as in the 1974 White Paper cited above) that the resources on the NCS had to benefit the whole society.

Offentlig styring av oljevirksomheten, illustrasjon, graf, engelsk,
Historical overview of investment in the Norwegian oil industry, 1990-2012. Source: Ministry of Petroleum and Energy

At the same time, government oil policy should be shaped to ensure that associated social changes occurred within an acceptable framework.

The commission proposed that the government should use total demand from the petroleum sector as the criterion for managing, preserving and developing expertise in this industry and in Norway’s offshore supplies business.

Maximum and minimum levels should be set for this criterion. The base line was seen as particularly important in preventing Norwegian industry becoming overly dependent on a single sector.

A stable level of investment of about NOK 25 billion per annum was considered to provide the desired effect. But it proved impossible to stick to that target.

 

Offentlig styring av oljevirksomheten, engelsk, illustrasjon,
Number of PDOs approved since 1990 by size. Source: Norwegian Petroleum Directorate

To achieve good management of activities, the commission called for a change to the practice of considering and approving all plans for development and operation (PDOs) of petroleum fields in the Storting’s spring session.

Instead, it proposed a process which would make it easier to even out the level of investment. This involved authorising the MPE to approve developments within a defined level of activity.

It was not until 1994 that a PDO was approved on these terms (for Vigdis on 19 December). Since then, about two-thirds of the 70 PDOs submitted up to 2015 have been ministry-approved.

 

A third proposal from the commission which has been highly significant and has attracted much attention was the creation of a special government fund.

This could serve as a buffer against big fluctuations in oil and gas revenues (from major price changes, for example). The suggestion was slipped in by interpreting the mandate a little broadly.

The “oil fund” – officially the Government Pension Fund – was not established until 1990, and the first transfer of revenues to it occurred six years later.[5]

Renamed the Government Pension Fund – Global in 2006, this sovereign wealth fund exceeded NOK 7 billion for the first time in 2015.

 

 

Queue

Offentlig styring av oljevirksomheten, engelsk,
Crude oil at Draugen. Photo: Shadé Barka Martins/Norwegian Petroleum Museum

When oil prices were at their lowest following the dramatic slump in 1986, the government had sought to encourage companies to maintain their level of exploration activity through tax cuts.[6]

However, concern was expressed when presenting the national planning budget for 1988 that the pace of development on the NCS was too rapid.

The petroleum White Paper presented in April 1987 had stated:

 

A level investment of NOK 25 billion in 1987 value could be too high when viewed in relation to the desired development of the rest of the Norwegian economy. The government will therefore continue its work on the question of how high the level of investment in the petroleum sector should be. Further details on this will be provided in the national planning budget for 1988.[7]

 

The government sought to pursue a strategy which it believed would take account of developments in Norway’s mainland (ie, non-oil) economy, petroleum-related industry, the resource position and revenue risk.

Known as the “queue system”, this approach was meant to be based on operator plans adjusted for restrictions on gas sales. That would allow the government to decide on postponements to bring annual investment down to NOK 25 billion.

At that time, in the autumn of 1987, the MPE had received PDOs for the Snorre and Draugen fields and was awaiting them for Oseberg phase 2, Heidrun and Brage.

In addition, a plan for installation and operation (PIO) of the Haltenpipe gas transport system in the Norwegian Sea was due before Christmas.

The first chapter of the White Paper concluded that: “The government will revert to the question of which fields should be developed first.”

Significance for Draugen

This field lies in block 6407/9 in the Norwegian Sea, where a production licence was awarded on 9 March 1984 as part of the eighth licensing round. Oil was proven there in the same year.

Draugen was accordingly found right in the critical period of low crude prices. And the government had been advised to manage the pace of oil development by regulating investment.

To secure permission to develop the field, it was therefore important to be able to come up with a “low-cost” and efficient solution.

The size of field and the government’s talk of offshore tax reliefs also meant it was interesting to plan for a rapid development process.

Where a find the size of Draugen is concerned, it has historically taken about seven years on average from discovery to PDO approval by the Storting.

In Draugen’s case, however, the time lag was a mere four years.[8] Its PDO had been submitted in September 1987, a full year before it gained the green light.

Einar Knudsen, former head of communication at Norske Shell, recalls the process as follows:

 

The queue proposal was launched, in other words, while the authorities were right the middle of considering the PDO. Shell and its partners reacted sharply to this arrangement, which struck more or less like a bolt from the blue. We were wholly unable to accept this for a project which was profitable, risk-free and not least friendly to outlying districts. Our strongest ‘competitor’ in this respect was the Heidrun early production project.

 

We worked intensively with the Storting’s standing committee on energy and the environment, and also succeeded in building strong alliances with politicians from Møre og Romsdal [county] in general and Kristiansund in particular, since we envisaged operating Draugen from the latter. This was also documented via the impact assessment, which we used for all it was worth. The combination of strong project economics (not least for the government) and sustainable regional policy meant that we won the day and were not included in any queue system.[9]

 

With the exception of a small delay to the Brage development, the queue system was never actually put into practice. Investment admittedly remained at about NOK 25 billion for a couple of years, but already exceeded NOK 50 billion in 1987 value by 1992. See the figure.

In chapter 5 of the 1994 oil White Paper, which covered further development of the petroleum industry, the Ministry of Industry and Energy stated:

 

The level of activity on the Norwegian continental shelf has been managed largely through the award of production licenses in […] 14 licensing rounds. Managing activity through licensing policy also represents the best way to take care of the need to secure continuity and predictability in the activity. Direct intervention […] to influence activity could reduce efficiency and increase costs […]. Viewed in isolation, that could also weaken interest in investing on the Norwegian continental shelf.”[10]

 

When summarising this chapter, the White Paper concluded that the pace of development on the NCS was dependent on conditions outside the government’s control.

When the PDO for Draugen came to be approved by the Storting in the autumn of 1988, the MPE recommended that the proposed plateau rate of production be increased from 90 000 barrels of oil per day (bod) to 110 000.

This move would have a substantial negative significance for the private companies in the licence, given that the government operated at the time with a “sliding scale” for state holdings.

Under that system, the government would regulate the division of interests in a field to give the state a bigger share if daily plateau output forecast for it exceeded 100 000 bod.

Where Draugen was concerned, this would mean an increase in the state’s direct financial interest (SDFI) from 50 to 65 per cent – with a possible rise to 75 per cent.[11]

The corollary was that Shell’s interest would decline from 29.4 to 15 per cent. That would represent virtually a halving of its holding.

A decision to exercise the sliding scale did not have retroactive effect, so that all the expenses met by the companies until then would remain theirs while their future revenues were significantly reduced.

The licensees, with Shell in the lead, reacted sharply to this recommendation and initiated effective lobbying efforts. These proved a success, and the PDO was approved with 90 000 bod as the expected plateau production.

Three alternatives for developing Draugen were referenced in the 1988 budget recommendation. When the PDO was approved on 19 December that year, interests in the licence were revised so that the SDFI and state oil company Statoil obtained a combined holding of 65 per cent.

Shell had to accept a reduction in its share to 21 per cent. And a further eight per cent increase in the state interest was approved by the Storting on 1 July 1995.[12]

Interests in the licence were again changed several times after the standing committee on energy and the environment recommended this increase from 65 to 73 per cent.

Over the years until 2002, however, the state’s direct holding was reduced to 47.88 per cent – which is where it stood in 2017.

[1] Norwegian Official Reports (NOU) 1983: 27, Petroleumsvirksomhetens framtid.

[2] Ryggvik, Helge and Smith-Solbakken, Marie (1997), Norsk Oljehistorie volume 3: 410.

[3] Ministry of Finance, Report no 25 (1973-74) to the Storting.

[4] Norwegian Petroleum Directorate (2013). Facts. The Norwegian Petroleum Sector.

[5] Norges Bank Investment Management  www.nbim.no/no/fondet/historien/.

[6] Ryggvik, Helge and Smith-Solbakken, Marie (1997), Norsk Oljehistorie volume 3: 413.

[7] Ministry of Petroleum and Energy: Report no 46 (1986-87) to the Storting.

[8] Norwegian Petroleum Museum http://www.kulturminne-valhall.no/Feltet/Geologi-og-reservoar/Fra-null-til-hundre-i-loepet-av-20-aar.

[9] E-mail from Einar Knudsen, former head of communication at A/S Norske Shell, to the Norwegian Petroleum Museum, 2016.

[10] Ministry of Industry and Energy, Report no 26 (1993-94) to the Storting: 53

[11] Energy and industry committee: Budget recommendation no 8 to the Storting. Supplement 2. (1988-89).

[12] Energy and environment committee: Budget recommendation no 197 to the Storting. (1994-1995).

Published May 14, 2018   •   Updated October 1, 2018
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Draugen noted

person Finn Harald Sandberg, Norwegian Petroleum Museum
A new series of banknotes was issued by African oil producer Angola in 1995. Why and how Draugen featured on one was a big puzzle for operations head Gunnar Ervik when he was interviewed by Trondheim daily Adresseavisen 10 years later.
— Angolas banknote worth 50 kwanzas.
© Norsk Oljemuseum

The banknote was for 50 kwanzas (AOA), corresponding to about 2.25 Norwegian kroner at the official exchange rate prevailing in September 2016. Its real value was about a third of this.

“Norwegian oil interests are strongly represented in Angola,” the newspaper noted.[1] “Norway also has diplomatic relations with a country which has rich oil and diamond resources but was characterised until recently by internal strife.

“The Norwegian flag generally follows in the oil industry’s wake. Statoil and Hydro have established a Norwegian oil colony in Angola with investment in the Girassol field, and Norwegian government ministers concerned with oil pay it visits.”

A representative of the Money Museum in Angola has provided the following explanation: “Angola has been involved in oil production since 1973 and this is currently the country’s most significant source of revenues. Oil earnings represented about 90 per cent of Angolan export revenues.”

Perhaps an explanation, but …

draugen på pengeseddel, engelsk
Angolas banknote worth 10000 kwanzas.

Two other banknotes have also been issued with oil industry motifs. One worth AOA 10 000 (NOK 450) features a drawing which resembles the platform on Angola’s Girassol field, where Statoil has an equity stake.

draugen på pengeseddel, engelsk
Angolas banknote worth 500 kwanzas.

The other, worth AOA 500 (NOK 23), bears drawings of a semi-submersible oil rig and a drill floor scene.

 

 

 

 

Published May 9, 2018   •   Updated May 9, 2018
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