If there's one thing seismic contractors
understand it's change. Technology, terms of contracts, markets,
customers, even the companies themselves - nothing about this business
stays static for long.
So they know about earth-shaking activity; talk to
them about change, and you're on solid ground.
Here's what they say: Today, while nobody is prepared
to proclaim that the most recent severe downturn is over for seismic
contractors, companies are beginning to see a light at the end of
That means they're also trying to predict what their
roles will be in the next new world of oil.
Not surprisingly, industry spokesmen see shifts in
their business that will open new markets for 3-D seismic data.
"We are moving into what I call the 'solutions period'
of our business in which we will be providing information for the
reservoir and production side of the business," said Steve Ludlow,
vice chairman of Veritas DGC and president of the International
Association of Geophysical Contractors.
"We as an industry have to highlight and prove the
value of 3-D seismic data beyond the exploration phase and make
that attractive to our customers.
"Today most reservoir studies are based on geology
and petrophysical data," Ludlow continued. "We believe seismic can
enhance and spread information further over a reservoir. In most
cases reservoirs are much more heterogeneous and complex than initial
models indicate, and we think we can work in a collaborative environment
with clients to more clearly delineate that heterogeneity."
Historically, seismic data gets left behind and engineering
takes over at some point in reservoir and field development.
"(But) if we can produce seismic images with superior
resolution, it becomes quite valuable in the production phase and
can help define the best way to produce a reservoir," he said.
Gary Jones, president of WesternGeco, agreed.
"Without question reservoir applications are where
the new growth in our industry will be," Jones said.
"Deep-water potential has been pushing exploration
in the Gulf of Mexico and other places around the world for well
over 10 years, and now that some discoveries have been made companies
are looking at appraisal and development plans. They are recognizing
the value of 3-D seismic in that stage because they need to get
it right on these projects where they are investing billions of
Jones said he was "seeing more commercialization
of time-lapse 3-D seismic" on the Gulf of Mexico shelf and the North
Sea, which are mature provinces.
"This technique provides fluid monitoring information
that can maximize and extend reserves through additions and revisions
rather than through new exploration," he said, "as well as increase
the recovery factor."
Big Things in Smaller Packages
seismic operations has kept the geophysical industry afloat during
good times and bad. Indeed, the seismic industry has gone through
good times and bad times during the past decade, and while no one
in the industry is too eager to declare the most recent downturn
ended, officials agree that a light can be seen at the end of the
tunnel. Their question now is: What's next?
Over the past decade, a tremendous amount of 3-D seismic
data was shot, and oil companies spent a great deal of money on
3-D seismic. That effort was primarily aimed at widespread, relatively
coarse, exploration coverage.
"The ballgame in the 1990s was speed, wider tows
on the cables in the offshore, and getting costs down to cover large
areas so people could look at regional sets of seismic data," WesternGeco's
Jones said. "The industry recognized that basin-wide coverage did
provide a tremendous amount of value."
Today, however, Jones said a number of customers
have indicated that in their view the next phase will be to shoot
smaller segments with much higher resolution on a proprietary basis.
"We've been talking for years about moving geophysics
into reservoir development, and I think we are finally at that stage,"
he said. "New technologies in the seismic industry will be geared
toward providing the finer, more precise measurements and processing
necessary for this new market.
"I suspect customers will discover that these small,
patch proprietary surveys for reservoir characterization will be
inadequate - that's just how exploration 3-D seismic coverage started,"
Jones continued. "But small patch surveys begin to overlap and migration
aperture overlaps, diluting the value of the data.
"I'm not uncertain we won't as an industry re-shoot
the Gulf of Mexico, for example, with very high-resolution technology
to provide broad coverage for reservoir management."
Jones also sees seismic's move into reservoir characterization
as an outgrowth of the "asset management team" approach within oil
companies. Asset teams include geophysicists, geologists and production
and reservoir engineers, and each is learning enough about the other
disciplines to recognize the value each brings to a project's overall
Advances in processing will be critical as seismic
moves into production applications.
"Processing is increasingly becoming the area where
a contractor can make a difference," said Bert Chenin, vice president
of marketing for CGG Americas.
"Seismic data has become more and more of a commodity
product with few differences in acquisition," Chenin said.
"I am convinced that within a few years we will use
geophysics to manage reservoirs. That's the area in which much of
the research and development efforts and funds are focused," he
added, "developing new techniques to improve the transformation
of seismic data into knowledge."
Chenin also believes the shifting focus toward reservoir
characterization also means longer-term relationships between contractors
and oil companies.
"The exploration period is by nature extremely important,
but very short," he said. "Producing and managing reserves is a
long-term proposition, so we will have to find new ways to relate
to our customers."
Ludlow said Veritas has made the commitment to processing
advances as well.
"We recently acquired RC2, a software
company that's developed a reservoir interpretation program, which
demonstrates our commitment to the reservoir business and our fundamental
belief that's the new direction for seismic contractors," Ludlow
said. "We've gone from a company with virtually zero internal knowledge
on reservoirs three to four years ago to (now) having nearly 500
man-years of reservoir knowledge across a very broad spectrum of
the disciplines that encompasses."
He acknowledged that production engineers are not
yet great believers in the benefits of seismic to their business.
"They've done it the same way for many years and
been very successful, so we still have a great deal of internal
marketing to do at oil companies before this concept is embraced,"
he said. "We will have to demonstrate the value of seismic to reservoir
Average production from a reservoir is in the neighborhood
of 35 to 40 percent of reserves, Ludlow said, (so) "if we can demonstrate
to customers that through better reservoir modeling with seismic
data that figure can increase to 60 to 70 percent, that's huge."
Finally, the growing importance of natural gas to
the energy mix around the world also will be good for the seismic
industry, according to Jones.
"Nobody disagrees that natural gas is the fuel of
choice for the future," he said. "Projections indicate that demand
for gas could far outstrip oil demand, by as much as 60 percent
He believes the seismic industry has a "unique ability
to detect natural gas due to velocity changes induced in sediments
when they are filled with gas.
"We can make direct detection of natural gas, making
3-D seismic data absolutely vital to gas plays," he said. "We can
service the industry and society by helping to map and develop natural
gas resources society needs."
How are companies approaching the brave new world
of seismic contracting? There seems to be a different formula for
are a specialty shop," said Lynn Chenault with Grant Geophysical.
"We specialize in land and transition-zone seismic. We are a worldwide
company, but we are able to move around quickly in the geographical
regimes in which we choose to operate."
Historically, Grant does "everything from large multi-client
international jobs to one-week shoots onshore the U.S.," and has
positioned itself to be "agile and quick" to take advantage of
onshore projects other contractors have turned away from.
Grant prides itself on being open to a variety of approaches
to the contractor-client relationship, and has become partners
with selected customers on specific projects.
"You have to be flexible and creative," Chenault said. "Many
independent companies don't have the deep pockets of major oil
companies, and we have to find ways to make projects work. As
the marketplace has changed we've had to change as well. We are
doing things today we never thought of before."
He said the seismic industry has become a bi-modal business,
bifurcating into a group of big oil companies and big seismic
providers and a second tier of independent oil producers and smaller,
more specialized seismic contractors.
He expects that division to continue.
Americas, among the world's oldest geophysical companies, derives
revenues from every market within the geophysical industry. For
example, CGG's subsidiary Sercel is the industry's largest geophysical
"We think being a force in every spectrum of geophysical activity
is unique and allows us to position ourselves for the future,"
Chenin said, adding that their expertise in geophysical hardware
and software, and data acquisition and processing "will allow
us to develop the 'intelligent' reservoir management technology
that the market needs.
"You do have to react to the marketplace," he continued. "Twenty
years ago we were very active in the U.S. onshore market, where
we had up to 30 land crews operating simultaneously," he said.
"However, in the last 10 years we recognized that the onshore
market was becoming extremely competitive and profits were slim,
so we decided to exit that business."
The company is now focusing on marine acquisition in the Gulf
of Mexico, with its primary focus being North America.
said Veritas doesn't try to be all things to all people. Instead,
the firm looks for regions where it can be the first or second biggest
player and develop a high level of expertise in those areas.
"We are one of the top companies onshore Canada, in the Gulf
of Mexico and in parts of South America where only one or two
seismic companies are active," Ludlow said. "We also dominate
the South East Asia 2-D market.
Ludlow believes contractors need to have a solid idea of which
markets they want to serve.
"For example, people ask why we aren't in the ocean bottom cable
business," he said. "I think that market is already over supplied,
and it would cost us in the range of a large eight to 10 streamer
3-D vessel to get an OBC crew up and running.
"That market is so competitive all we would be doing is moving
the crew around at our expense and working for zero margin," he
added. "There's enough supply out there already."
of course, is a unique situation. Since the merger of Western Geophysical
and Geco-Prakla, the new firm has "a role as the industry leader,"
"We need to set the tone for the business and assume the leadership
mantle in areas such as safety and environmental issues," he said.
"We are challenged to meet society's conflicting demands of more
energy and less of a footprint on the environment."
He believes that "what sets our company apart is that we are
present geographically everywhere, and we are present technologically
in just about every niche in the industry.
"That's really a first," he continued. "Historically this has
been a business of local niche and technology players. It's been
exciting meshing the two companies.
"However, we understand that being large doesn't mean much,"
he said. "We have to earn business by delivering superior service,
quality, technology, safety and environmental responsibility."
An Abundance of Riches?
Technology is definitely an area where geophysical
contractors have excelled. That trend will continue, but some industry
spokesmen see those advancements slowing down.
"Oil companies have virtually eliminated research
and development programs, leaving it to contractors," said Dick
Miles, Grant Geophysical's president and chief executive officer.
"But the geophysical industry today simply doesn't have the funds
for a large research and development effort, so the whole cycle
of technology advancement, which in the past has been rapid and
continuous, will slow down."
That, he said, makes the future of the geophysical
industry a little hazy.
"Technology has always opened new markets and allowed
the industry to thrive," Miles said. "The next few years will be
In fact, Miles and Chenault believe the industry
has a couple of more lean years to weather before any substantial
"Seismic contractors did a very good job in the 1990s
of shooting large 3-D seismic surveys, and there is still a big
bubble of prospects out there that don't need further seismic,"
Miles said. "There is also a big bubble of speculative data on the
shelf that will feed another bubble of prospects.
Miles added that he went to a talk by the president
of a small independent oil company recently who said his firm has
an inventory of 200 prospects ready to drill - "about a two year
backlog," he added.
"Clearly, we are not in the free fall that we experienced
a year ago," Jones said. "Business has stabilized. The question
now is, will it remain at this level with modest growth, or are
we going to have more expansive growth in the near term? I don't
think anybody really knows right now."
What everyone is sure of is that in the long-term,
seismic will always have its place.
"When we interview customers and ask them what is
the most important technologies in the last 20 years, they all say
3-D seismic by a wide margin," Chenin said. "Any report you read
about our industry says that 3-D seismic far and away has created
the most value for oil companies of just about any other tool, and
that's because of 3-D's inherent ability to reduce risk.
"That isn't going to change in the future," he added.
"Oil companies know they need seismic technology to succeed."