CASE STUDY: HOW A SMALL COMPANY ADOPTED 3D SEISMIC TECHNOLOGY

Stephen W. Knecht
Neomar Resources Inc.
Houston

Susan Helgeson
Landmark Graphics Corp.
Houston

Small exploration and production companies can combine 3D seismic technology and "niche" exploration close to home to grow in a tough competitive environment.

Neomar Resources Inc., a five person, prospect generating boutique, has followed such a strategy successfully since its founding in 1982.

Working the complex geology along Louisiana's transition zone along the coast, Neomar established itself in a niche that had not been fully exploited by major oil companies. Between 1983 and 1989 it achieved a 50% drilling success rate in the area.

With the addition of 3D seismic in September 1991, Neomar doubled its drilling success rate to 100%, making five discoveries in five attempts through August 1992. These successful completions off 3D seismic also doubled to 18 the number of proven, stratigraphically different pay zones in a key 5,000 acre block.

This article examines Neomar's strategy and how it might be adopted and adapted by other small E&P companies.

EXPLORATION NICHE

Neomar was launched on a familiar strategy: It would seek to identify prospects adjacent to the majors' producing properties, looking for leases whose potential may have been bypassed or overlooked.

The company concentrated its search along the Louisiana Gulf Coast transition zone, about 2 miles either side of the beach.

Neomar has been active in several areas along the transition zone but has focused primarily on the Bay Marchand-Timbalier Bay area for several reasons.

Chevron has a highly prolific field penetrating the area's primary feature, Bay Marchand dome, Louisiana's largest salt feature and oil field. Bay Marchand-Timbalier Bay is one of the few offshore areas along the Louisiana Gulf Coast known to be relatively oil-rich.

Many of the wells there have produced 2 million bbl each. However, the multiple upper Miocene and Pliocene reservoirs associated with the massive salt complex are highly faulted, steeply dipping, and difficult to interpret.

An intensive study of existing 2D seismic and well control convinced Neomar that the transition zone near Bay Marchand-Timbalier Bay held significant potential reserves-and that leases there had not received the same close attention as prolific fields nearby.

Also, the transition zone's waters were shallow, with an average depth of about 25 ft. Drilling and production could be relatively inexpensive.

Neomar therefore identified the Bay Marchand-Timbalier Bay offshore transition zone as an exploration niche which met all its key criteria. Lacking extensive financial resources, the company at first moved with particular caution.

At state of Louisiana monthly sales, Neomar was able to pick up leases in its area of interest, some of which had been held by majors since the 1950s. Between 1983 and 1989 Neomar acquired leases in the area adjacent to Chevron's field. The company financed drilling by marketing each prospect to investors and industry partners.

During this period Neomar drilled 10 wells there and made five successful completions. Of these, the best individual Miocene completion has currently produced more than 360,000 bbl of oil from 9,800 ft. The best Pliocene completion has produced more than 6 bcf of natural gas from 3,700 ft. Both are still producing from their initial perforations.

Conservative management of Neomar's finances and assets in the ground enabled the company to gradually build up a significant cash reserve and by 1990 to acquire leases in the Bay Marchand-Timbalier Bay offshore transition zone totaling more than 18,000 acres.

With only five employees, including its president, Neomar became the area's second largest leaseholder after Chevron.

PRE-3D STRATEGY

Early on, it was determined that Neomar would perform all its own interpretation and analysis of subsurface data.

This critical competitive decision meant that over the long term Neomar acquired a very thorough understanding of the transition zone's complex geology.

Prospects were generated off existing 2D seismic and well control. Most interpretation was performed using paper sections, and Neomar's 50% drilling success rate compared favorably with that of other exploration teams using mostly manual methods.

The company had long been aware that major oil companies had been using 3D seismic for a decade or more. Not until the late 1980s, however, did Neomar begin to take serious interest in 3D.

When the interest turned to action, 3D seismic and 3D workstation technology would suddenly transform the company by accelerating Neomar's growth at Bay Marchand-Timbalier Bay from five discovery wells in 7 years to five in less than 7 months.

3D'S GROWING PRESENCE

By 1990, reports filed with the state of Louisiana indicated to Neomar that Chevron was making a relatively high percentage of 2,000 b/d completions in the Bay Marchand dome.

Around the same time, presentations at various scientific forums showed that 3D technology could reduce drilling risk and improve the siting of wells to increase production.

In June 1991, Chevron indicated that it had approximately doubled production at Bay Marchand to 32,000 b/d-further increased to 40,000 b/d by January 1992 -largely by the use of new 3D mapping techniques. These combined 3D seismic with amplitude extraction and volume 3D auto-tracking performed on interpretation workstations.

It appeared that these techniques had enabled Chevron interpreters to efficiently pick the cleanest, thickest take-point in a given reservoir within a particular fault block.

To Neomar, Chevron's reported successes at Bay Marchand brought home the full competitive impact of 3D technology. It reinforced Neomar's new vision of its own future: Adopt 3D or risk being edged out over the long term by other producers using the efficient new technology.

Neomar also saw opportunity. By acting now it could move quickly into 3D and get a jump on other small independents who were not yet aggressively pursuing a 3D strategy.

Potential pay zones in the Bay Marchand-Timbalier Bay transition zone are multiple sands located in numerous fault blocks. 3D data would provide the detail Neomar would need to resolve more-accurate images of the subsurface and build higher-confidence models.

The timing seemed right in other ways. More information was becoming available about the methods employed by the majors who had pioneered 3D seismic and interpretation using 3D workstations. By 1990 an increasing percentage of worldwide seismic data acquisition activity was focused on 3D. The capabilities of 3D workstations were maturing, their performance increasing, and the costs of workstations and 3D data acquisition falling.

ADOPTING THE TECHNOLOGY

Despite compelling advantages and competitive necessity, adopting 3D technology posed substantial risks for Neomar.

A 29 sq mile proprietary 3D survey over its lease holdings at Bay Marchand would cost $1.2 million plus $160,000 for purchasing a 3D workstation to interpret the seismic. The total cost would nearly equal Neomar's annual operating budget.

As before, Neomar wanted to gain maximum understanding of its plays and thus retain maximum control of decision making. This meant the company's small, geologically trained staff would have to commit a significant amount of time to learning 3D seismic interpretation techniques.

Early in 1991 Neomar made the decision to acquire the 3D seismic and began a months-long comparative evaluation of workstations to interpret the data.

Criteria included the ability to handle a significant number of highly complex fault blocks. The fault block would have to be identified and numerous horizons within each block quickly interpreted.

To facilitate testing of multiple hypotheses, the workstation would have to excel at interactive iteration. It would also have to minimize such time-consuming tasks as picking horizons line by line.

For Neomar, time was critical. Several of its leases would expire in March 1993 ' barely more than a year after the expected delivery of processed 3D seismic data. Lease decisions would have to be made quickly, or potential opportunities would be lost.

Neomar's evaluation spotlighted a workstation feature which could help relieve the company's time pressure: 3D volume auto-tracking. With only one seed line and a tracking mode adjusted to high sensitivity, a Neomar geoscientist would be able to quickly interpret an entire fault block.

Structure would be revealed and selected horizons rapidly mapped; sand thickness would be mapped by amplitude extraction. Instead of interpreting line by line, the interpreter could visualize horizons of interest virtually in real time (Fig. 1).

Volume auto-tracking would therefore enable the interpreter to quickly understand relationships among structures within the target area, quickly test and refine hypotheses, and strengthen the emerging model by utilizing large amounts of data without getting bogged down in detail. Volume auto-tracking became the most important criterion guiding Neomar's workstation purchase decision.

3D INTERPRETATION METHOD

The seismic survey was started in September 1991. Neomar took delivery of a 3D workstation in October, the same month data acquisition was completed.

By early February 1992 the seismic was processed and ready for interpretation on Neomar's 3D workstation. Between October and January Neomar had engaged in extensive training on the workstation, using spec 3D data sets to practice interpretation.

Three weeks after the company's 3D seismic data were delivered, several prospects had been generated from it. A total of 31 prospects within the survey area have now been generated and graded.

Based on these prospects, Neomar currently anticipates drilling a total of 20 wells during the next 3 years.

To begin developing its 3D seismic interpretation, Neomar employed the following procedure:

Tie the well data by choosing several arbitrary lines through the volume.
Use the well log data to determine where the formation of interest ties to the seismic.
Interpret the key horizons along the arbitrary lines.
Activate the volume auto-tracker, which now uses points along the arbitrary lines as seed points to interpret the entire survey.
Activate the optional feature permitting the volume auto-tracker to extract amplitudes during auto-tracking.
Study the resulting distribution of amplitudes to determine thickness of sands (net sand varies with amplitude strength).
Calculate attributes-dip and azimuth. Use these attributes to map subtle faults, which in turn help identify reservoir barriers that can hinder production.

This procedure enabled the Neomar interpreter to rapidly, iteratively test hypotheses, improve the quality of subsurface models, and apply geoscience expertise more fluidly and effectively than was possible using manual methods.

3D TRACK RECORD

At present, five prospects based on Neomar's proprietary 3D data and interpreted on the company's workstation have been drilled and logged. All five have resulted in successfully completed wells.

Each was drilled in a separate fault block and completed in reservoirs that had not been previously produced within that fault block.

The first well, completed last April, logged 175 ft of pay and tested initially at rates up to 2,400 b/d of oil. Prior to a temporary interruption caused by Hurricane Andrew, the well was producing at its allowable of 700 b/d. The second well, logged in May, tested at up to 1,400 b/d.

Within a single target area-the Bay Marchand-Timbalier Bay offshore transition zone-Neomar pursued two strategies: niche exploration combined with 3D seismic technology.

The combination approach initially posed financial risks but to date has doubled the company's drilling success rate to 100%, resulting in five successfully completed discovery wells, which have tested as much as 2,400 b/d of oil (Fig. 2).

Neomar moved into 3D interpretation to get a jump on competitors by finding and producing reserves much more efficiently and cost-effectively than by other methods. Its experience demonstrates how significant success can be achieved by acquiring 3D seismic data and interpreting it on workstations with volume auto-tracking.

It is likely that other small and mid-sized independents can achieve similar results with 3D technology.