Seismic contractors are noticing tiny rays of light after a very dark 1999. But 2000 is not likely to become dazzling any time soon.

Sometimes it's hard to be optimistic in this industry. But you have to be." These words, spoken by Rene VandenBrand, vice president of business development for Veritas DGC Inc., could almost be the mantra for the seismic industry. Where else is there such intense pressure for contractors to take on more of the research and development onus, risk more of their capital on seismic acquisition and yet continually lower their costs?
A few years ago the model was a little simpler. When oil prices dropped, oil companies curtailed their exploration spending. When prices rose, they started buying seismic. Seismic activity was the leading indicator for increased E&P spending.
But times have changed. The larger seismic companies began shooting more multiclient or even speculative surveys, owning the data themselves and licensing it to multiple oil companies, because it gave them more control of their assets and kept their crews busy in lean times. The result is an abundance of inexpensive, high-quality data that is often available to oil companies before they ever lease acreage.
So now it's the undrilled prospects that get first nod when prices rebound, and seismic contractors are left wondering, "When will it be our turn again?"
A few aces in the hole
Though the model may have changed, the inherent stubbornness of folks determined to make their mark in the seismic industry has not. Most of these companies have weathered multiple downturns, so they know how to get going when the going gets tough.
New technology is one key. At Fairfield Industries, for instance, growing client interest in multicomponent acquisition has led the company to fit all of its crews with multicomponent technology. While there is still considerable debate about the best way to leverage this new information, Marc Lawrence, senior vice president and division manager at Fairfield, thinks multicomponent will gain rapid acceptance in the near future, much more quickly than the move from 2D to 3D took place.
"When we move from 3D to 4C/3D, it's not an order of magnitude difference (in price); it's a percentage difference. It is a more expensive technique. But that change in thinking has, for the most part, occurred."
Technologically, the industry isn't fully ready yet. There's no commercially available interpretation software on the market for 4C work, and research needs to be done on the proper processing and acquisition methods. But Fairfield's transition-zone radio telemetry acquisition method has lent itself well to a relatively inexpensive equipment upgrade. The company is limited to a niche within 300ft (91.4m) of water, but Lawrence thinks being one of the first to offer the technology on all of its data will give it an advantage.
In other areas the economics are muddier. While some think multicomponent is the technology that will enable contractors to reshoot the same areas with improved data, the improvement in data might not justify the additional acquisition cost.
"In areas where you've already got 3D programs and several surveys, it's questionable whether going back and reshooting it would be an economical success," said Mike McCormic, vice president of marketing for Western Geophysical. "For an incremental increase in data quality, people might not be willing to pay for that cost."
Other niches include reprocessing technology. Most contractors of any size offer a variety of methods to take even rather vintage data and find more information through new processing algorithms. This is a particular advantage for companies with large data libraries, allowing them to breathe new life into their older data.
In many cases seismic contractors are finding themselves moving into more of an interpretation mode with their reprocessing work since many processing methods such as prestack depth migration require multiple iterations with interpretation work needed to determine the next step. At Veritas, for instance, the company has hired disenfranchised experts from the oil companies to give them in-house expertise. It also offers visualization centers for its clients to work with their data, and the Veritas experts are on hand to provide consultation to the clients.
"We've invested in the visualization centers, not because they're huge profit generators but because they're a differentiator for everything else that we do," VandenBrand said. "They help differentiate us when we do large contract jobs, and they differentiate us in our ability to deliver data to our customers and help them interpret that data and really get the maximum value out of it."

Leverage
He added that in one case a client used the visualization center to do a reservoir characterization job. The cost for that service was relatively small, but in the process the client decided to invest in about US $1 million worth of seismic data. "That's how we want to leverage the traditional core areas of our business using some of this advanced technology," he said.
At PGS, resident experts also are preparing for what company officials sense will be an increased interest in reservoir-specific seismic. Many contractors are shying away from this type of service because a producing field doesn't lend itself well to a multiclient model, but continued interest in 4D, or time-lapse, seismic and permanent downhole sensors indicates reservoir seismic might offer a good niche. "What we expect over the next 5 years is that there will be far more reservoir-specific seismic technology, and we're gearing ourselves up to provide more solutions into that marketplace," said Rob Pinchbeck, senior vice president of marketing for PGS. "There's still a lot of leverage that the seismic companies can bring to exploitation of oil and gas fields."
The Reservoir Evaluation-Seismic division of Schlumberger, formerly known as Geco-Prakla, also hopes to expand in this niche, anticipating any increase in activity this year will be related to reservoir seismic. "This is consistent with Schlumberger's objective of 'producing the second one-third of oil in place,'" said Robin Walker, marketing manager for North and South America. Added Leif Larsen, marketing and new technology manager for marine seismic, "Since we expect to see growth concentrated on existing reservoirs, the new business is by definition proprietary."
Walker added that spec seismic shot purely for exploration is often unsuitable for detailed reservoir analysis.
But virtually every other contractor interviewed sees spec as its ultimate savior. "Any time you have a depression in the market, it's the spec data that saves your company," Lawrence said. "We like putting our crews on spec data because when you're operating crews, the hardest thing to do is to keep that crew working in a consistent manner. That's a distinct operational advantage."
Added Pinchbeck, "Unlike some of the industry, multiclient has been a key part of our strategy all along. We didn't have to overcome any reservations internally about that; we just saw it as a very smart time to build our high-quality library."
Most contractors are seeing spec take an increasingly important place in their activity level. VandenBrand said about 50% of Veritas' work is multiclient, up from 30% just 3 years ago. And it will probably continue to rise.
"We certainly like the multiclient model better than the contract model today," he said. "That's not to say we don't like the contract business; we want to see it improve, and I think it needs to improve to maintain a strong industry." But he disagreed with naysayers who feel spec data has made 3D seismic a commodity. "In the multiclient business it's not a commodity, because generally if you have data in an area, you have it exclusively. It doesn't make economic sense for us as competitors to go in and overshoot."

2D seismic
Another niche is 2D seismic. While 3D is considered much more reliable for making drilling decisions, and while the spec model has allowed 3D to be used more often on a basin-wide exploration basis, there's no question 2D still has use as a rank exploration tool. And the cost of 2D spec is comparatively very affordable.
Perhaps for these reasons, the 2D market is seeing something of a rebound. John Greenway, vice president of corporate communications for PGS, said that through about 1997 the 3D market was growing at the expense of the 2D market. But starting in 1998, the 2D market began to make a rebound, though not at the expense of its more sophisticated cousin. Oil prices had a say in this in several ways; in addition to the 2D data being more affordable, some of the older 3D boats in the world's fleet were facing mothballing as newer capacity came on line and the bottom fell out of the market. But turning an older 3D vessel into a 2D vessel gives one "a pretty capable 2D boat," Greenway said.
The 2D market is still a strong one for TGS-Nopec. Without a large fleet of vessels to keep busy, TGS also is one of the few companies that expects to increase its spending this year. "Our investments are tied to the number of good projects that we can develop and secure capacity for," said Hank Hamilton, chief executive officer. "We've been steadily growing our investments year after year."
With much of its focus on 2D, TGS can explore areas that haven't yet seen much 3D activity but which are likely to be subject to licensing rounds sometime in the future. It already has claimed a considerable foothold in the eastern Gulf of Mexico, which expects its first lease round since 1988 next year, and also in Brazil, where it teamed with Schlumberger to provide broad 2D coverage of the First Round licensing area. TGS also has projects under way offshore eastern Canada and in the North Sea, and it's surveying areas offshore Portugal and Morocco as well. The Morocco survey is well away from the frenzy offshore Nigeria and Angola, but TGS is looking at a different part of that same continental shelf to find analogs.
As companies look at different strategies to increase market share, the hope is that smaller oil and gas companies will take advantage of this expertise. "The seismic industry is ready with the tools, both in acquisition and especially in processing," said John Kingston, communications manager for Schlumberger Oilfield Services. "The turnaround in our fortunes will happen when some of the independents pick these tools up and use them to gain an edge on the megamajors. Then these majors will be faced with no option but to change their process and also realize, and be willing to pay for, the value of seismic."
The land market
The advances in 3D seismic acquisition that contractors crow about have mostly come in the marine environment. Vessels now can tow 12 or more streamers, where a few years ago four was the norm. Streamers are longer, enabling the company to acquire more data on a single pass. Onboard computers have taken some of the burden off of home-office-based processing systems and reduced turnaround time.
Much of this technological whirlwind has left the land market behind. Land crews have definitely increased their channel counts, but in addition to being able to acquire more data the crew now has to lug around twice as much equipment, sometimes through hostile territory. "When we go in convoy it looks like the Russian army is out on the road," said Richard Ward, president of Grant Geophysical.
So the land market continues to be a tough place to do business. But it's not impossible. Ward anticipates his company will do about twice as much business this year as last, though less than in 1998. Grant has nine crews working worldwide, roughly half of what it had in 1998. But the average number of channels per crew is much larger than it was 2 years ago.
On the contract side, land crews are beginning to see some glimmers of renewed activity. McCormic said some tenders are beginning to come out of the Middle East, and VandenBrand added Canada and even onshore United States are expected to be more active this year than last.
Unlike other companies, Grant doesn't see the multiclient market as a huge growth opportunity, at least in the near term. For one thing, land spec surveys are more costly to the contractor because he must absorb the up-front land entry permit and permit acquisition costs, which normally are reimbursable on a private contract. Additionally, few regions of the world boast the political and legal structure that makes multiclient work feasible. "We would go do multiclient surveys right now if they had a high level of underwriting," Ward said. "But we need well in excess of 65% underwriting, and there aren't deals like that right now."
One approach Grant is interested in - which has been anathema to other contractors - is the idea of taking an equity interest in the end project rather than relying totally on after-sales of data. "This is a new departure for us, but we feel it's a necessary addition to our portfolio," Ward said. "In that model, we'd have the direct contracting business, the multiclient business and equity participation, and there are all kinds of blends with those three approaches."
The idea of equity participation also extends to reservoir seismic, another area Grant expects to be a growing source of business, Ward said.
When will it turn around?
Other than TGS and Schlumberger, which expects a small increase in activity over 1999, most contractors expect their spending and activity levels to be either flat to 1999 or somewhat down. According to Spears and Associates Inc. in Tulsa, Okla., the global geophysical services and equipment business was a $4.2 billion market in 1999. The 2000 figure is forecast to be about $3.8 billion.
The reason is pretty simple: without oil companies opening their wallets to fund contract and spec work, contractors are a little leery of taking on too much more risk by themselves.
So why aren't the oil companies spending any money on seismic? Apparently they've been burned one too many times. Pinchbeck said one chief executive was quoted in his company's annual report as stating that oil prices were near $30/bbl, but oil companies were acting as though they were going to be $14/bbl for the rest of time. "That is an absolutely accurate reflection of where things have been since the beginning of the year," he said. "The budgeting flexibility of the oil companies is much different than it used to be 10 years ago, and they're much more careful when things go up and down during the course of the year."
Their reluctance to let go of that hard-earned cash will likely haunt the seismic industry for the better part of 2000. Most contractors are expecting some ease in the tension in the second half, or possibly the last quarter, of the year; others don't anticipate any real change until 2001. The only likely exception to this is a situation like Brazil, where oil companies have to move quickly to seize an opportunity and don't have the luxury of time. Then they'll be eager for readily available spec data.
"The best way to describe the seismic business right now is to say that it's percolating," VandenBrand said. "I believe we have hit bottom and are bouncing off that bottom to different levels in different markets." He added the multiclient business is reasonably active, and he's starting to see signs of renewed activity for marine contract acquisition.
"Seismic is still the only technology that we know of, or that seems to be on the horizon, that really helps identify new basins and new reservoirs," he said. "It's still recognized as the most important technology out there; we just need to get paid a fair price for it. If we can find a way to do that, we'll all smile."