Oil spill impact on the seismic industry

Excerpted from the “Seis Matters” blog

In recent weeks, I’ve been pondering what impacts the Macondo blowout might have on the seismic industry. A great deal has been written about the impact on overall E &P activity in the Gulf of Mexico (GoM) and the residual fall-out on the oil service industry, including deepwater drillers, marine support vessel operators, and the like.

But I haven’t read all that much in the business or trade press about the potential impacts – good and bad – on the seismic sector. So I thought I’d toss out a few perspectives, and open it up to readers to add their views to the mix.

I believe that seismic players with assets in the Gulf – whether those undertaking surveys when the blow-out occurred or those in possession of multiclient data libraries – will take a near-term hit. With Interior Secretary Ken Salazar insistent that the deepwater drilling moratorium not end before Nov. 20, 2010, there is a lot of uncertainty as to how long it might take for the E &P industry to return to prior levels of activity. Regardless of when the moratorium is lifted, it will take several years for the E &P industry to return to prior activity levels in the GoM.

As we all know, uncertainty tends to prolong buying decisions. So we likely won’t see any new multiclient programs secure the underwriting needed to get started in the Gulf, and we probably won’t see that much in the way of additional sales of GoM data libraries “on the shelf” to E &P companies that don’t already own licenses to them. So existing GoM seismic projects and data libraries may be somewhat “stranded” for the next several quarters and not transact at the levels we’ve seen over the last 18 months. We may, however, see a significant wave of reprocessing activity as E &P operators try to improve upon legacy multiclient data in order to identify and high-grade potential leasing areas or drilling prospects in anticipation of the moratorium being lifted.

Beyond these effects, I actually see a significant amount of upside for our industry. It will be driven by the re-allocation of capital to other geographic regions which, in turn, will drive a need for new seismic data.

We’re already seeing an emerging consensus that onshore E &P projects – especially shale gas plays in the US - will emerge as “winners” in the wake of Macondo. This shift will be driven by the perspective that onshore developments are less technologically daunting, and therefore safer, than those happening under a mile or two of ocean. It will also be driven by the perspective that natural gas is cleaner than oil both on a greenhouse gas basis and on the perceived level of environmental damage that would occur from a blowout of a natural gas (vs. oil) well.

If this resurgence of unconventional gas plays does occur, we’ll likely see a resurgence in new onshore seismic acquisition over these plays in both the US and Canada. It’s likely that BLM and state-driven mandates will require higher quality seismic over the reservoirs being developed than was perhaps the case in the past,