There was a virtual smorgasbord of invaluable
information disseminated to the SRO audience during the Dealmakers
segment of the recent, highly-successful AAPG Prospect and Property
Expo (APPEX) meeting in Houston. Presentations covered a plethora
of topics, including capital sourcing, A&D market conditions,
establishing a toehold overseas and more.
today's high-tech E&P business, it came as no surprise that
a large crowd was on hand to hear Anadarko president John Seitz
talk about innovative techniques and technologies for A&D and
Although many companies continue to grow ever bigger
through the ongoing spate of mergers, it's drilling and not acquisition
activity that is needed to find the new oil and gas reserves needed
for the long term. Much to the consternation of the public E&P
companies, however, investors want drillbit action but no risk --
an impossible task.
Risk is a fact of life in this business, but it can
be reduced considerably, and Seitz described some of the new exploration
applications Anadarko is using to lessen the uncertainty indigenous
to oil and gas exploration.
"In seismic acquisition, Anadarko is a key player
in the BLAST program," Seitz said. "This is a UK-based consortium
effort with a goal to successfully image below basalt by employing
a low-frequency marine seismic source combined with an ultra-long
offset recording geometry.
"We're applying this technique as part of our exploration
program in the Faroe Islands."
The Faroe Islands in the northeast Atlantic halfway
between the Shetland Islands of northern Scotland and Iceland, are
volcanic in origin, rising above a massive basalt platform. The
three largest exploration licenses issued in the initial Faroese
licensing round are within the basaltic plateau. Anadarko is the
sole party in one license and holds a 27.5 percent interest in another.
Basin studies indicate source, seals and reservoirs
should be present, but Seitz noted they can't see potential traps
with conventional seismic. Anadarko acquired more than 200 kilometers
of BLAST data on one of the licenses in addition to conventional
seismic data. These data currently are being processed, but enhanced
imaging already is evident, Seitz said. The BLAST array employed
to acquire the BLAST data consisted of two 2,000 cubic inch, low-frequency
airguns along with 17 smaller low-frequency airguns.
Reducing the Risk
In the arena of petroleum systems analysis, Anadarko
is examining methods to reduce charge risk.
"To this end, we're using 3-D migration modeling
based upon the principle of 'percolation invasion'," Seitz said.
"This is a mathematical approach that allows for rapid basin modeling
at seismic resolution scale for multi-phase hydrocarbon systems."
Recent areas of application include West Africa,
and he noted they are particularly excited about an application
called Mpath, which is produced by the Permedia research consortium.
The tool concentrates on capillary flow or the balance between buoyant
forces and resistance of the pore throats to invasion. Seitz noted
this approach is far faster than traditional Darcy models.
"Because the Permedia tool is so fast, we are able
to try out many variations of each model to help quantify the risk,"
he said, "or at lease identify the sensitivities.
"And the small cell size that leads to a realistic-looking
model both helps us with visualization and reassures us that even
small geometrical features that could affect migration and entrapment
are included in the model."
New seismic technology that enables clearer imaging
of the subsurface is responsible in large part for Anadarko's discovery
of almost three billion barrels of recoverable reserves in the Berkine
Basin of Eastern Algeria, where it continues to explore.
Despite dramatic improvements in seismic imaging,
however, seismic data do not provide a complete picture of the subsurface.
Geoscientists often must interpolate across spatially incomplete
data sets and make predictions about sub-seismic-scale deformation.
Seitz said Anadarko is trying to incorporate the
physics of how rocks deform into the mapping procedure. He noted
the geometry of faults and folds is not random in the subsurface,
but rather there are forces acting on a rock mass that impart systematic
and predictable patterns of deformation.
"We have identified Fourier analysis as a useful
tool for extracting quantitative information about structural periodicity
from spatially incomplete data," Seitz said. "The basic concept
underlying Fourier analysis is that by adding together simple sinusoidal
functions we can reproduce any complex surface.
"This approach has been successful in predicting
existing hydrocarbon accumulations in Algeria."
Getting down to the reservoir level, Anadarko has
used high-resolution gas chromatography and gas isotopic analysis
in the deepwater Gulf of Mexico to establish the presence of reservoir
connectivity between well penetrations to support field development
"Risk management is an area where Anadarko believes
value can be added by use of financial technologies," Seitz said.
"Our use of Real Options in exploration decision-making began in
1994 and continues to expand."
In the M&A world, sources of value other than
existing production and assets often are overlooked or valued in
a cursory manner. Leading-edge financial technologies like Real
Options analysis can provide significant value by assessing value-adding
opportunities such as exploration potential and proven undeveloped
reserves among others.
Real Options value is derived from the resolution
of uncertainties. For exploration projects, these uncertainties
typically are related to the presence of a viable petroleum system,
reserves size, development costs, commodity price and timing.
Real Options analysis played a key role recently
in Anadarko's acquisition of Gulfstream.
Besides Gulfstream's proven hydrocarbon reserves,
Anadarko was interested in the prospective but highly uncertain
exploratory potential of the company, particularly several exploration
concessions held in Qatar. Properly valuing these concessions was
"Real Options analysis revealed significant value
associated with the exploratory position Gulfstream held," Seitz
said. "One of their exploratory concessions alone added millions
of dollars of net to value of the acquisition."
He noted the analysis provided Anadarko with a more
realistic valuation of the asset so the company could be competitive
in the acquisition.
"In a data room situation, we know how much to pay
for the exploration upside."