The industry downturn has had a devastating impact on the seismic industry. Tied closely to E&P budgets, seismic spending is roughly half that seen prior to 2014. In the marine sector vessel rates have declined sharply to values that have not been seen since 2003, and there appear to be few drivers to push rates higher. Even with the recent increase in oil prices, the 2017 E&P spend for major operators appears to continue its decline. For those companies that expect modest 2017 increases in their E&P budgets, most of that spend will likely be focused onshore.

The only relative bright spot in the marine seismic business is multiclient acquisition. For companies such as PGS and CGG, multiclient sales account for more than half of their revenues, and the expectation is that the market will grow as oil companies position themselves for strategically important license rounds. This comes at a time when contractual marine seismic surveys have all but disappeared, accounting for less than 20% of CGG’s and PGS’s revenue, according to the companies’ financial reports. Even Polarcus, which has maintained a 70% to 80% contractual utilization rate over the past few years, is working to build its multiclient library and has a cooperation agreement with TGS.

However, the contractual marine seismic market is not completely dead. Some operators with sufficient cash flow can take advantage of low vessel rates to acquire proprietary exploration surveys. Of the two proprietary marine seismic surveys acquired by Apache in 2016, one was an exploration 3-D survey in Suriname which, according to David Monk, director-worldwide geophysics, was acquired at a “time when we could capture bargain-basement prices. An equivalent survey three years ago would have cost four times the price, and my guess is that if we had waited for a couple of years, it would double.” However, these surveys of opportunity are likely an exception and not the rule.

Although exploration activity has been significantly curtailed by many operators, there is a sense that companies may be focusing greater attention to producing assets and, as a consequence, 4-D seismic surveys. Is that true?

In a Sept. 20, 2016, press release, Andrew Latham, vice president of exploration research at Wood Mackenzie, said, “Companies are no longer trying to fully replace production via conventional exploration as they used to. Now their reserves replacement will also require inorganic, brownfield or shale investments.” In an article on the FairfieldNodal website, Charles Davison, CEO of FairfieldNodal, said, “The ‘E’ in E&P is dead … at least for the short to medium term, however long that may be.” He continued, “Despite the fact that producers are attempting to rein in expenditures in every stage in the life of field, it is clear that they will be much more focused on maximizing the productive capacity of existing brownfields.”

Indeed, it appears that many of the contractual marine seismic surveys are in the production sector. The other Apache survey acquired in 2016 was 4-D over the Forties Field. “Since 4-D [activity] keeps the asset going, it’s tough to simply cut this out of a capital budget, whereas 3-D [activity] for exploration can typically be delayed,” Monk said.

Data from the Norwegian Petroleum Directorate (NPD) show that of the 52 seismic surveys completed in Norway during 2015 and 2016 (excluding 2-D and site surveys), 30 were multiclient and 22 were contractual acquisitions. Of the 22 proprietary surveys, 17 were 4-D. However, 11 of the 17 4-D surveys were shot over permanent reservoir monitoring (PRM) systems at the Snorre, Grane, Ekofisk and Valhall fields. In these cases, the operators have significant upfront investments that must be recovered. Fortunately for PRM, monitor survey costs are lower than for comparable towed-streamer surveys.

The Top Forties reservoir depth surface (top) with extracted 2013-2000 4-D amplitude differences (bottom) is shown. Blue 4-D anomalies identify water-swept portions of the reservoir. For additional information, see “Resaturated pay: A new infill target type identified through the application and continuous improvement of 4-D seismic at the Forties Field” by G. Byerley et al., The Leading Edge, October 2016, 831-838. (Source: Apache)

A large fraction of a small number is still a small number

Although it appears that there might be an increase in the relative percentage of proprietary 4-D monitoring surveys vs. 3-D exploration surveys, the overall decline in seismic acquisition activity has hit 4-D.

Data from the NPD show that the number of 3-D surveys completed in Norway during 2015 to 2016 has declined 45% from the preceding two-year period (64 to 35 surveys). Over the same period the number of 4-D surveys declined by 37% (27 to 17 surveys), with most of the cuts focused on streamer surveys.

For Statoil there has been about a 30% reduction in overall seismic activity since 2013, according to a company source. There is roughly a 50:50 split between exploration surveys, which are dominated by multiclient acquisition, and production seismic surveys. For Statoil, which has a long history of 4-D seismic acquisition, there is no refocusing of effort. This ratio is similar to historical levels. But, as the company contact puts it, there is “just less for everyone.”

The reduction in overall seismic activity, including 4-D, is a common theme among global operators. For many companies surveys that might have been planned for 2016 to 2017 have been deferred until 2018 to 2020 or beyond. One case in point is Petrobras. A company source noted that new PRM projects, due to their high initial investments, are being delayed.

According to a source at Chevron, 2016 to 2017 4-D surveys are driven by either contractual obligations or drilling opportunities. Beyond 2017 only very large projects are even being considered for new 4-D surveys, and the economic threshold for their approval is high. In the past, management might have required justification not to shoot 4-D surveys. But that is not the case currently. The long-term value of 4-D surveys often is neglected in favor of impact on immediate drill/no-drill decisions.

At Shell, where a company source said most 4-D surveys were acquired as planned in 2016, 4-D activity is region-dependent. Several surveys were deferred, in part because alignment with joint venture partners can be a challenge in this economic environment. The situation is expected to remain the same over the next few years.

Fewer wells imply fewer 4-D surveys

Recent successful surveys for BP in the Gulf of Mexico (GoM), approved before the downturn, are spurring plans for additional 4-D activity. According to a company source, as long as there are active drilling campaigns, it does not appear to be hard to justify new surveys.

However, outside the GoM the future for 4-D surveys at BP does not appear as bright. In Angola and the U.K. North Sea, where the company has had past 4-D success, options for drilling and, as a result, for 4-D surveys seem to be running out.

As another operator said, “It doesn’t help to find more 4-D targets if the drillers don’t have the budgets to drill them. Four-dimensional seismic competes with other field development investment projects (templates, wells, etc.). We’ve had to ensure that our business cases are robust and competitive in a lower oil price.”

A similar story for land

The weak seismic market is not limited to the offshore. Reporting the company’s third-quarter 2016 financial results, Stephen C. Jumper, president and CEO for Dawson Geophysical, said, “Demand for seismic data acquisition services in North America and worldwide continues to be soft in response to low and uncertain oil prices and reduced client expenditures.” CGG, which operated 22 land crews in 2013, reduced capacity to five crews by 2016, according to the company’s financial reports.

Excepting North Africa and the Middle East, onshore operators are focusing their limited land seismic budgets on producing assets. In Western Canada, where the seismic industry has been especially hard-hit by the downturn, Mike Doyle, president of the Canadian Association of Geophysical Contractors, said in a 2015 interview with the Daily Oil Bulletin that there is still seismic work. “There will be some work in the oil sands,” he said. “Typically, you need some 4-D dealing with steam-assisted gravity drainage (SAGD), and that type of work still tends to occur because it is linked to production.” In fact, operators not only continue to acquire 4-D surveys for thermal recovery monitoring, as evidenced by recent technical publications, but companies such as Nexen and Devon are even working to enhance 4-D imaging of steam chambers using multicomponent (3-C) seismic.

With potentially better near-term investment returns compared to exploration, some operators are turning to EOR to boost production. Apache’s only 2016 land seismic survey, planned to start before year-end 2017, was a 4-D test to evaluate the potential to monitor CO2 flooding in an old onshore field. According to Monk, the asset is willing to fund this survey even though the team understands there is no guarantee of success.

However, most 2017 E&P spending increases are likely to be focused on unconventional oil and gas, areas that have proven to be challenging for 4-D activity.

Silver linings

Although there are signs the seismic market is stabilizing, most acquisition companies don’t expect any immediate rebound in activity. However, there might be some areas of increased 4-D activity. As noted by several companies, there is growing interest in lower cost monitoring solutions such as distributed acoustic sensor vertical seismic profiling, high-resolution 4-D activity and the use of small seismic sources.

Some operators also are turning to reprocessing of legacy surveys shot over producing fields as proxies for new 4-D acquisition. Recent technical papers show timelapse comparisons between ocean-bottom seismic (OBS) and streamer data as well as wide-azimuth vs. narrow-azimuth seismic. This approach maximizes the value of the operator’s seismic assets and can serve as a bridge to future 4-D acquisition using systems such as OBS.

The downturn also has provided time for companies like Petrobras and Chevron to refocus their attention on enhancement of older 4-D surveys using new processing algorithms and technologies such as improved imaging based on full-waveform inversion.

With improving oil prices some companies are indeed looking forward to increased 4-D effort. According to a company source, during 2017 to 2018 Petrobras will acquire the first 4-D survey covering a portion of a presalt carbonate field undergoing alternating gas and water injection. And during 2018 to 2019 the company will cover many of its giant oil fields with OBS technology. There are also indications from several other operators that 4-D surveys deferred to 2020 or beyond might be accelerated to the 2018-2019 timeframe.

For those operators willing to take a longer term perspective, the current drilling downturn might ultimately result in greater 4-D value. As the industry recovers, companies might be less willing to engage in long-term rig contracts. As a result, there could be less pressure to “feed the rig monster,” allowing 4-D seismic data to drive drilling programs rather than reacting to them— but only if the data are acquired.

Ultimately, it is all about demonstrating value, as it always has been for 4-D seismic. As one company source put it, “As long as you have a good business case, with a competitive breakeven, you can shoot 4-D seismic with us.”