The worldwide explosion of non-exclusive 3-D seismic data has been a boon for contractors and oil companies alike, but serious data licensing issues have been a constant source of concern for both sides.
That's especially true when the oil industry is in a state of flux, and acquisitions and divestitures are the order of the day.
Who owns the data in the event of a merger?
Can a company show a potential merger partner licensed data?
Can data be shown to buyers when a firm is attempting to sell properties?
These and more are all questions that often put contractors and their customers at odds.
And that's why, according to Charles Darden, president of the International Association of Geophysical Contractors, it's vital for the geophysical industry to have stringent data licensing guidelines and to educate the industry to those guidelines.
Last year IAGC sponsored its first conference on data licensing issues — and the topic is so critical that another conference is scheduled for Oct. 31 in Houston, co-sponsored by the Independent Petroleum Association of America.
"In the near term, the licensing of non-exclusive 3-D seismic data will remain a critical part of the oil and gas industry," Darden said, "and that being the case, it's imperative that all parties understand how best to use it.
"Educating people will alleviate many problems and at the same time encourage continued and greater use of non-exclusive data."
Start Spreading the News
While the first IAGC conference was a success, contractors felt a continuing education process was not only desirable but also essential, because there are still major issues that are not well understood by clients.
In addition to the Houston meeting, IAGC is planning several different events to promote better understanding of data licensing.
"In fact, we are kicking off a major publicity initiative," Darden said. "Following the Houston conference we will sponsor two additional meetings in Louisiana."
And since data licensing has become a global issue in recent years as the amount of non-exclusive data acquired worldwide has increased, IAGC will hold a conference in the first quarter of 2001 in the United Kingdom, Darden continued — and the Australian chapter is currently putting together a conference as well.
The conferences are not the only effort IAGC is undertaking to educate the industry on data licensing. Members of the data licensing committee will be making presentations to groups throughout the world.
"Without a doubt," Darden said, "data licensing is one of the major priorities of our association."
'A Continuing Dialogue'
Marc Lawrence, senior vice president of speculative data with Fairfield Industries and chairman of the IAGC data licensing committee, said this year's Houston conference is not a repeat of last year's meeting.
"This is a continuing dialogue," Lawrence said. "This year we will focus on issues that were not touched on last year — such as an international perspective, e-commerce and how it relates to data licensing."
Lawrence said much of the conference will be devoted to a panel discussion that will discuss:
- Data transfer fees and disclosure issues.
- Who owns derivative data products and what happens to those products if data is turned back to the contractor.
- Using speculative data on the Internet for acquisitions and divestitures.
- The ethics of data quality checks.
- Data security and relationships with application service providers databases.
The panel discussion could be provocative.
"The subject of transfer fees is always high on everybody's radar screen, particularly today with the large amount of consolidation going on in our industry," Darden said. "Also, the Internet has become a big concern for contractors, and that should be a lively debate."
Lack of Understanding
Officials with geophysical contractors said some companies and people in the oil industry are quite educated about data licensing, but others are woefully ignorant.
Darden pointed out that the retrenchments and consolidations in the oil industry recently have created a void in people both within the oil companies and supply companies that had a great deal of expertise in data licensing.
Also, he said, in the U.S. market clients for speculative data are increasingly independent oil companies, and many of these firms don't have the legal staffs or significant scientific staffs of geophysicists and geologists that understand the issues surrounding non-exclusive data.
"So, it is necessary that we initiate this educational process at the same time we market data," he said.
John Adamick, vice president of business development with TGS-NOPEC, agreed.
"While there are typically certain individuals within every company that have a good grasp of the limitations under data licensing agreements, however, too often oil companies don't do a good job of translating those issues to their employees," Adamick said. "Plus, in recent years as more seismic contractors moved to non-exclusive 3-D data as a significant portion of their business, license agreements have become more restrictive to protect that huge investment.
"Oil companies have to recognize and understand those changes."
Another important change has been the growth of non-exclusive data outside the United States.
"There's a whole clientele in other parts of the world that are not familiar with non-exclusive data," Adamick said. "We will have to work especially hard to help them understand the restrictions under data licensing agreements."
Taking Government to School
In addition to educating companies in other parts of the world, Darden said geophysical contractors have an equally difficult task of educating governments on the ins and outs of non-exclusive data.
"Often governments want to make seismic data public much quicker than data owners can tolerate and still recover costs and make a return on their investment," he said. "Over the years IAGC has negotiated with government agencies to resolve some of these issues.
"In situations where governments have a mandate to do resource evaluations, we have recommended that they visit the contractors' offices, use the data on sight, with experienced staff geophysicists to help them," he said.
"However, my sense is that officials feel that early release of the data will encourage more exploration activity," he continued. "But that's short-sighted. Geophysical contractors will cease acquiring non-exclusive 3-D data if they don't have a reasonable time frame in which to recover their costs and, they would hope, make a profit."
John Hood, manager of North American offshore surveys with CGG, agreed.
"Geophysical companies use a financial model to determine cost recovery," Hood said. "If the terms of the licensing agreement are not followed it's difficult to make those projections, and that will ultimately affect the way contractors do business.
"The model is already changing somewhat due to the consolidations in the industry," he said, "but we can't tolerate situations where people aren't buying data because they saw it somewhere they shouldn't have."
A Lot at Stake
According to Lawrence, the entire petroleum industry has a tremendous stake in continuing non-exclusive seismic activity.
"Speculative data allows us to offer state-of-the-art technology that's affordable to oil companies of all sizes," he said. "From the contractors' perspective, in an industry downturn it's speculative data that allows companies to survive. It's a rare exception among acquisition contractors to find a company that doesn't do at least some speculative work.
"In fact, a large portion of almost every contractor's business is non-exclusive data."
Hood added, "As long as contractors can accomplish cost recovery and make some profit, we can still offer speculative surveys. Otherwise contractors will have to find another way of doing business.
"We are trying to communicate as an industry with the oil companies that it's in everybody's interest to keep a good product at a very attractive price."