Abstract. The oil industry uses geomagnetic field information to aid directional drilling operations when drilling for oil and gas offshore. These operations involve continuous monitoring of the azimuth and inclination of the well path to ensure the target is reached and, for safety reasons, to avoid collisions with existing wells. Although the most accurate method of achieving this is through a gyroscopic survey, this can be time consuming and expensive. An alternative method is a magnetic survey, where measurements while drilling (MWD) are made along the well by magnetometers housed in a tool within the drill string. These MWD magnetic surveys require estimates of the Earth's magnetic field at the drilling location to correct the downhole magnetometer readings. The most accurate corrections are obtained if all sources of the Earth's magnetic field are considered. Estimates of the main field generated in the core and the local crustal field can be obtained using mathematical models derived from suitable data sets. In order to quantify the external field, an analysis of UK observatory data from 1983 to 2004 has been carried out. By accounting for the external field, the directional error associated with estimated field values at a mid-latitude oil well (55 • N) in the North Sea is shown to be reduced by the order of 20%. This improvement varies with latitude, local time, season and phase of the geomagnetic activity cycle. By accounting for all sources of the field, using a technique called Interpolation In-Field Referencing (IIFR), directional drillers have access to data from a "virtual" magnetic observatory at the drill site. This leads to an error reduction in positional accuracy that is close to matching that of the gyroscopic survey method and provides a valuable independent technique for quality control purposes.