We know what hasn't worked in the marine seismic industry. Now the contractors are attempting to determine what will.
By RHONDA DUEY, Exploration Editor (Hart’s E&P, May 2004)
In the past 5 years, oil prices have plummeted and then risen again. Major companies have merged to become even larger companies while others have succumbed to accounting scandals. Terrorism has reared its ugly head in a way nobody could have imagined. Oil companies have posted some of their most profitable quarters ever.
And throughout it all, the seismic industry seems to have been shriveling up and dying.
How can it be so difficult to make money acquiring data that most oil companies consider to be absolutely crucial to their exploration success? Perhaps it's just the learning curve of a new industry. After all, geophysical contractors acquiring 3-D seismic data over the world's oceans didn't exist until fairly recently. Growing pains are to be expected as companies try on new business models to find the best fit. But one thing seems fairly certain - whatever the best fit turns out to be will probably bear little resemblance to the way the market looked in 1999.
By now the travails of the seismic industry, particularly in the marine environment, are well known. Simply put, geophysical contractors, buoyed by the heady successes of the early and mid-1990s, poured tremendous amounts of capital into new-build vessels with the hopes of cornering the hot marine seismic market. Around the same time the "group-shoot" concept helped oil companies lower the price on seismic by sharing the cost amongst themselves. Ultimately there were too many vessels chasing too little new territory, and the contractors found themselves shooting purely speculative surveys, with no predetermined customers, just to keep their massive investments afloat and working.
Data from Fairfield Industries hits home showing just how devastating the situation became. Jim Thompson, vice president of operations for Fairfield, began compiling information on the worldwide marine fleet from the mid-1970s to the present, and by graphing the number of vessels and the attendant cost, he discovered that by mid-1999 the industry was spending more than US $3.5 billion per year on marine seismic, far more than it could ever hope to recoup.
The understanding today is that at some point the contractors ceased giving the oil companies exactly what they were looking for. "The collapse of the oil price in 1998 caused a dramatic change in the seismic industry," said Leif Larsen, vice president and general manager for marine seismic at WesternGeco. "Our customers stopped spending money in exploration with the exception of a few frontier areas. Since then they have mainly used their much-reduced seismic budgets on known reserves. Unfortunately, the seismic contractors continued to invest in multiclient surveys, believing that this drop of the oil and gas industry's exploration investments would recover quickly. However, this has not been the case."
When contractors began shooting purely spec seismic, the lack of pre-identified oil company customers meant there was no client input into the design of the survey. This "one size fits all" approach might work somewhat well in a regional survey, where it's the basin-scale geology that's of interest, but it's less effective in developing specific prospects.
Anticipating this, geophysical contractors have attempted to retrench, focusing more on high-resolution imaging that's useful at the reservoir scale, either for the refining of exploration prospects or for reservoir monitoring. This focus has led PGS, for instance, to develop the capability to tow high numbers of streamers very much closer together to provide improved high density spatial sampling of the wavefield.
"In the past the industry has recorded 3-D data at too coarse intervals in order to save costs. This has been at the expense of resolution and image quality," Diz Mackewn, president of PGS Marine Geophysical, said.
Reservoir-scale surveys can pose their own set of problems since they tend to be smaller (in other words, not helping to keep the boats working all the time) and since reservoir monitoring, in particular, requires interaction with reservoir and production engineers who don't always see a need for seismic data. Still, that retrenchment does seem to be one direction that shows future promise.
A better fit
It has not been an easy path. Hit hard by economic misfortune, geophysical contractors aren't necessarily in the best position to invest large sums of money in research and development. But they have managed to continue the development of some very promising technologies, and it seems that their clients are beginning, more and more, to realize the value of those developments.
One technology that seems to have fully arrived is prestack depth migration (psdm). Aided initially by better compute power that reduced the need for "stacking" data to make the datasets more manageable, psdm then had to endure growing pains as processors and interpreters got used to the new way of doing things. Cost, initially, was also an issue since the process requires multiple iterations to arrive at the best answer. But the enhanced ability to locate targets in depth slowly won converts, with the result that it's now almost routine.
"Rigorous analysis of prestack data is now a very common and prevalent practice," Hank Hamilton, chief executive officer of TGS-Nopec, said. "As a result, there is more emphasis on longer offsets, longer record depths (in some areas), higher-quality field data and more sophisticated noise reduction techniques early in the processing sequences."
Coming along more slowly, but still gaining acceptance, are time-lapse seismic and multicomponent seismic. Though not the same thing, multicomponent seismic complements time-lapse (4-D) seismic in that it records the full seismic wavefield and is better able to detect subtle changes such as the movement of fluids through the reservoir, which of course is what 4-D seismic attempts to track.
Most contractors are definitely noticing a ramp-up in 4-D activity, particularly in the North Sea, where it's estimated that 75% of the 3-D surveys that are shot are repeat surveys for reservoir monitoring. 4-D presents a number of operational and technical challenges to the contractors. In addition to requiring a very high-resolution image, the surveys must be repeatable so that changes detected can confidently be attributed to changes in the reservoir rather than some acquisition artifact. It also is more time-constrained in that production decisions often need to be made much more quickly than exploration and drilling decisions, meaning that the data needs to be acquired, processed and interpreted within a few weeks rather than a few months.
Still, improved technology is starting to pave the way for increased acceptance and use of 4-D methods. Larsen said that WesternGeco's Q technology is enabling operators to use 4-D in more difficult imaging environments where the 4-D signal is weak. And at Input/Output (I/O) a number of changes are being made to the acquisition equipment and technologies to improve repeatability-source control to synchronize the guns and deliver more concentrated energy into the subsurface, tools to increase the positioning of hydrophones on the streamers, and better streamer control through the use of steering systems that can control feathering and allow streamers to be pulled closer together to improve subsurface image quality.
Multicomponent acquisition, which measures shear as well as compression waves, can't be acquired by streamers because shear waves don't travel through water. Acquiring marine multicomponent data requires the sensors to be placed on the ocean floor through a process commonly referred to as ocean bottom seismic or seabed seismic. Anyone who's dealt with seabed seismic knows that it can be cumbersome and extraordinarily expensive but that the images are of vastly higher quality than those acquired with streamer data.
"Oil companies have told us that if they could have seabed data for the same price as streamer data, they would only shoot seabed," Bjarte Fageraas, vice president and chief technology officer for I/O, said. "There is no question about the data quality. But today it's five to 10 times the cost per square kilometer in some areas."
I/O and other companies are looking at ways to reduce the operational cost and are experimenting with smaller-diameter, more flexible cables that can be spooled on the back of the vessel. Experiments are also underway to determine better methods of deploying the cables on the seafloor and for improving the cycle time for processing.
It's likely that in the near term the marine seismic market will continue to increase its reservoir-focused surveys using improved technology that provides better images of the subsurface. But other changes are also afoot, and some of the recent changes may be more cyclical than permanent in nature.
"There is a growing emphasis among oil companies to replace reserves through exploration that will eventually lead to a little more focus on frontier areas and, consequently, a need for seismic data as a means to understand the regional geologic picture," Hamilton said.
But it's unlikely that the "spec wars" of the late '90s will return. Fageraas said the oil companies are becoming more image-focused and less likely to sign on for a generic survey. To succeed in this era, the service companies will need to become less asset-intensive, minimizing their invested capital and ensuring they are nimble in asset deployment and field operations, he added.
At the same time, they will need to provide the latest cutting-edge technology, a tough requirement for some of today's cash-strapped contractors.
Best-in-class technology has become relatively easy to access in the global marketplace if a company is willing to spend the money to secure it. Chris Friedemann, vice president of commercial development for I/O, said there is an ongoing trend for new companies to enter the business from the emerging markets - China and the Former Soviet Union in particular - and equip their new-build towed streamer vessels with the best available technology. In China the government has been supporting a significant push to ensure its state-owned oil and service companies will become competitive on a global basis.
"China has a massive requirement for new energy supplies both at home and abroad," Friedemann said. "To ensure Chinese firms had sufficient capital, the Chinese government partially privatized these companies. All of a sudden they had funds available to procure best-in-class technologies. They want access to the best as they feel it gives them a competitive advantage versus others in the market."
They also have less overhead in terms of their fleet sizes and enough operational expertise to compete with their larger Western counterparts, he said.
How will the Western companies retain their market share? Some argue that continued consolidation will help reduce the overcapacity of vessels and bring more discipline to the market.
"Consolidation is one of the answers to the current marine industry problems as it will allow cost reduction and improved pricing," Jean Charot, executive vice president of offshore acquisition for CGG, said. "The marine industry in less than 5 years will hopefully look like many other successful oilfield service sectors where ... the market is dominated by two major seismic contractors."
Larsen sees the role of the contractors as one of helping oil companies improve their reserves, whether it is through the discovery of new fields or through better recovery in existing fields. "Our clients will need much more detailed images of their reservoirs, and they need to know how they can maximize their production and extend the lifetime of their fields," Larsen said. "There must be a step change in the recovery ratio, and this will not happen without new technology. Four-D seismic is likely to be a major component of this new technology portfolio, enabled as a business tool by short survey intervals and extremely rapid turn-around."
Most agree that larger surveys will not entirely disappear. Companies such as TGS and GX Technology are already shooting very large 2-D surveys in frontier areas, often with full pre-funding. And even the multiclient market may make an appearance in some form, though hopefully not with the primary goal of keeping large vessels away from the dock.
"The way the spec market started, contractors had underwriting from interested companies when they acquired the surveys," Fageraas said. "They were well-funded surveys, and it was a very good business model. It started out very efficiently, but the market situation drove it to what it became."
Added Friedemann, "We still believe there's a market for multiclient marine acquisition. But it's going to be a different market, more like a return to the early days when the oil companies were fully on board from the beginning. The seismic company that is putting the survey together will need to bring something differential to the table so that the resulting image is better. It could be just one element but is more likely to include a series of integrated offerings across the entire seismic workflow, including different acquisition geometries, improved technology on the vessel and an advantaged processing technique."
"WesternGeco won't go back to the standard or traditional multiclient business model," Larsen said. "But I do think we may see some sort of hybrid model. As long as the seismic contractor can cover his costs and get a reward for the success of the project, that's the type of business model you'll probably see."
Added Mackewn, "If the seismic industry is to have a financially secure future, the contractors will need to derive a reasonable return for providing seismic services and new technology, which most oil companies still agree are key to improving their reserve replacement position. Of course, we need to continue to develop even more efficient methods for providing improved quality seismic."