Building a European Independent

Hamilton, Vincent Jon¹ (1) Tethys Oil, Geneva, Switzerland

The oil business has been active in Europe for longer than it has in the USA, starting with oil production from hand-dug wells in the early 1800s. However, activity levels are now very low by comparison. Moreover, drilling density is lower overall in Europe by an order of magnitude.

A number of factors have contributed to this situation including the following: state monopoly oil companies, lack of pipelines and access to them, controlled product prices, access to data, and no individual ownership of mineral rights. The advancement of the European Union has helped to bring about change, particularly with the deregulation of natural gas markets and pipeline access.

Opportunities for entry into the upstream business are more abundant in exploration than production due to a competitive and limited market. Many areas have been lightly explored since the oil price crash of 1986 and the slump in prices in 1998 that slowed new licensing. Advances in seismic and drilling technology can be applied for the first time in some areas. Since most exploration targets are moderately sized, it is better suited for small and mid-sized companies with lower overhead, and flexible strategies and management.

Challenges to operating in Europe include shortage of equipment and services, slow licensing and approval processes, and access to land. One way to overcome this is to initiate several projects at the same time in different countries, keeping the portfolio of projects replenished. This also spreads the geological and non-technical risks.

In general, exploration opportunities are abundant for the imaginative, but production purchases are limited in number and highly competitive. Three exploration projects and one field development will be given as examples.