How PGS created a new image for the Varg field

History of Southern North Sea Licence 038 Production Licence 038 (see Fig. 1 for location) is today owned by Pertra (70%), and the Norwegian state through Petoro (30%). Pertra is a wholly owned subsidiary of Petroleum Geo-Services (PGS). Licence 038 includes both the Varg oil-field and the Varg South structure (previously called Rev). Oil and gas was found on Varg South in 2001, but this structure needs further appraisal before decisions about its development can be taken. Norwegian authorities approved the plan for field development and operations for the Varg field in 1996. It was decided to use an FPSO (Floating Production Storage and Offloading) vessel to produce the oil. The licence group at that time sold the FPSO to PGS in 1999, and leased it back for a three year period. Through this transaction PGS came one step closer to its goal of becoming one of the world’s largest and most reliable operators of advanced FPSO vessels in harsh weather conditions. In December 2001, Norsk Hydro offered its share of Licence 038 to PGS and subsequently Statoil did the same. PGS accepted both offers, and hence currently owns 70% of Licence 038. This is the first time a service company has owned and operated an oil field in the North Sea, representing a new and interesting business model for the oil industry. Why did PGS want to go into the role as operator? The FPSO rental agreement between PGS and the previous license group was approaching a decision point and PGS had to evaluate other missions for the vessel. As licence owner it would be simpler for PGS to find the optimal time for transferring the FPSO vessel to other fields. In addition, PGS felt there was a commercial upside in applying its knowledge and technology to increase and extend the oil production of the Varg field and also in developing unrealised prospects in licence 038.