North Sea waters have been considered one of the world's most secure offshore basins for producing crude, until now.
Equinor, Total Energies and ConocoPhillips have all raised the security level around their facilities in the region after drones were seen near platforms.
The recent history of drone attacks on Middle East oil facilities offers a foreboding precedent for the effectiveness of these military devices in targeting energy infrastructure, and international oil majors in Norway and the UK would be foolish to ignore the threat.
According to research in the Energy Security Sentinel produced by S&P Global Commodity Insights, 75% of the 23 recorded drone attacks over the last five years on Middle East oil and gas facilities in the Gulf using aerial drones hit their target. The data, which analyzes 88 major incidents in total over the period, suggests drones were harder for air defense systems to intercept than conventional missiles.
Compared with drone attacks, missiles have been less effective, the data shows. Of the 18 confirmed missile attacks aimed at energy infrastructure in Saudi Arabia since 2017, 92% were successfully intercepted by the kingdom's security forces, according to the Energy Security Sentinel.
By contrast, drones are harder to defend. Most notably they were mainly used in 2019 to attack the giant Abqaiq and Khurais oil facilities in the kingdom, briefly knocking out 5.7 million b/d of supply. The attacks succeeded in breaching the kingdom's sophisticated US-made Patriot surface-to-air-missile defense systems at what are the world's most strategically important oil facilities.
A similar drone attack in the North Sea could be equally discombobulating for the oil market. Not least because the region still produces about 3 million b/d of oil between the UK, Norway and Denmark. The North Sea also provides vital light sweet crude streams preferred by European refiners and used by traders to help price two-thirds of the $1.4 trillion global oil futures market.
Global spare capacity buffers are also thin, with only around 2 million b/d of supply readily available to offset any supply shocks, while the US has just completed a historic release from its Strategic Petroleum Reserve to help bring prices down below $100/b.
Fear of drone attacks on North Sea oil and gas facilities comes after an unprecedented increase of concerns over the security of key European energy infrastructure following Russia's invasion of Ukraine.
These concerns were heightened in the final week of September by major leaks at the Nord Stream gas pipelines, which have been blamed on state-sponsored actors.
Officials in Europe and the US have gone further, directly pointing the finger at Russia for the underwater blasts, which have caused vast amounts of methane to leak into the Baltic.
The Nord Stream incidents, which Moscow blames on the US and its allies, were quickly followed by Norway increasing security around its oil and gas fields in the North Sea after it warned unidentified drones had been seen near facilities far out to sea.
Oslo's warning was quickly followed by a similar tone from the UK, which advised operators in its territorial North Sea waters to "ensure operational resilience and response plans are up to date and ready to be deployed if required" following the Nord Stream incident.
"The 2019 attack on Abqaiq ushered in a new era of energy security, by demonstrating the ability of new technology to overcome traditional military defenses and disrupt significant oil supply volumes," said Paul Sheldon, chief geopolitical advisor at S&P Global Commodity Insights. "Similarly, newfound threats to energy infrastructure could arise from the war in Ukraine, a dynamic which may be already materializing through apparent sabotage of the Nord Stream pipeline and still opaque risks to North Sea facilities. When combined with increasingly frequent export sanctions against large oil and gas producers, these realities could expose energy infrastructure in relatively secure locations to unprecedented disruption risks."
Prior to the deterioration of relations between the Western powers and Russia any thought of drones attacking North Sea oil rigs would have been dismissed as absurd. However, the targeting of Nord Stream could signal a new paradigm in European energy security when the previously unimaginable becomes possible.
Source: S&P Global