Restating the oil industry public value proposition
Chip Gill, IAGC, Houston
When the oil industry comes under intense public scrutiny as it has since the Deepwater Horizon disaster last year, the business of service companies inevitably suffers from the fall-out. To counter some of the negative perceptions, the International Association of Geophysical Contractors (IAGC) believes that geoscience-related E&P companies can and should emphasize the value of their technology in the finding and producing of oil offshore in a safe and environmentally responsible manner.
There is no avoiding the fact that many people are perennially angry at the oil industry. Last year it was the Deepwater Horizon environmental disaster and fatalities in the Gulf of Mexico that got everyone going. This year, in the wake of Middle East unrest, it's the exorbitant price of gas at the pump that is supposedly bulging the coffers of oil companies.
Escaping the negativity is an almost superhuman task because public perceptions often contain at least a grain of truth. The rig explosion and blowout at the BP Macondo well was indeed inexcusable, and no oil company in history has ever made a credible defense of profiting from unexpected shortages, as nice as this may be for shareholders.
We in the oil business must confront this undercurrent of anti-oil industry sentiment. This is not just a matter of hurt feelings; it harms the business for oil companies and, from our perspective, the service sector. Governments worldwide have never been especially well disposed to the oil industry, and they need little encouragement to play hardball over licensing, taxation, etc.
In the US, whether this is the case over the continuing restrictions imposed by the Obama Administration on deepwater drilling in the Gulf of Mexico is for others to decide. What we know in the marine seismic contracting community is that operations in an important region have been severely disrupted with no clear indication as to when the situation will stabilize. Significant expected revenues and opportunities have been postponed or lost, and continuing uncertainty over future regulations and licensing in the US OCS Act are a deterrent to oil company spending on exploration and development.
Somehow we need to redress the balance. To do that, we must "accentuate the positive." Two key things that need to happen are for the industry to a) rebuild its image based on some level of trust about the responsibility in oil and gas operations, and b) promote the public value proposition, i.e., that the industry is on the frontline every day working to keep gas stations supplied, planes flying, farm machinery fuelled, etc. at a price that is still affordable and achieved in a way that is environmentally sustainable.
In the geophysical community, which provides equipment and services to the E&P industry around the world, we have a message that meets these two criteria. Our technology has been a game changer for 25 years. Oil companies the world over have been able to find and produce substantially more oil and gas while drilling fewer, safer, smarter, and more environmentally friendly wells in increasingly challenging plays. In other words, more oil and gas is being produced to meet world energy demand. Lower finding costs mean improved returns for stakeholders, and less drilling is good for the environment.
These are major achievements attributable to one small sector of the E&P industry. Credit is due to the remarkable advances made in the way geoscientists use seismic and other geophysical technologies to image what lies beneath the earth and identify hydrocarbon potential. It's why for at least a decade oil industry polls have consistently named 3D seismic surveys as the most influential technology in the business.
It is inconceivable that any oil company these days would contemplate drilling an exploration well offshore without first carrying out seismic surveys over the prospect. In the pre-3D seismic era, the chance of finding oil with a well was probably 1 in 10, hence the term "wildcat." But the term is a misnomer today because 3D seismic and other geophysical technologies take much of the guesswork out of drilling. Oil companies work with extremely sophisticated computer-based 3D models of the subsurface, derived from seismic and other data, which can identify the structures most likely to be hydrocarbon-bearing and the optimal location to drill.
It is not an exact science, but drilling success ratios worldwide have dropped spectacularly. Just one example, Anadarko reported that in 2009 it had a 50% drilling success in deepwater plays of the Gulf of Mexico, Brazil, and West Africa, resulting in nine discoveries.
From a financial point of view, investing in seismic and other geophysical surveys is a no-brainer, especially when it comes to deepwater plays where the cost of drilling a well can be upwards of $100 million and costs are likely to rise as governments continue to add more stringent conditions to drilling operations.
"Our technology has been a game changer for 25 years. Oil companies the world over have been able to find and produce substantially more oil and gas while drilling fewer, safer, smarter, and more environmentally friendly wells in increasingly challenging plays."– Chip Gill
The cost of these surveys represents a small fraction of that of a single deepwater well. This is extraordinarily good value in terms of de-risking the spending on an exploration well, and explains why the world's marine seismic fleets are invariably busy when oil companies loosen the purse strings on their E&P budgets.
In addition, seismic imaging is able to pick up on potential subsurface hazards, such as shallow gas pockets, which undetected could cause a drilling accident. There are also seismic-while-drilling techniques that can help steer the drill-bit safely. Despite public perceptions, these techniques and other safeguards have over the years enabled oil companies to drill thousands of offshore wells without incident.
The non-exclusive survey option arguably offers an even better deal for oil exploration companies. For instance, ahead of bid rounds for offshore acreage around the world, marine geophysical contractors routinely carry out surveys (often 2D rather than 3D for economic reasons) over the area to be licensed. Then at a fraction of the cost of the whole survey, oil companies can buy into the data, which gives them valuable information on which blocks are prospective.
The bare financial figures do not tell the whole story. Since the late 1990s' major consolidation and downsizing of the oil industry, the onus for R&D in subsurface imaging technology has fallen almost entirely on the service sector. During the last decade or so, a number of ground-breaking geophysical technologies have been developed. Offshore 3D seismic itself has evolved to the extent that modern seismic vessels can tow anything from 6–20 streamers (cables 6–8 km long filled with thousands of sophisticated recording units).
In addition, data processing, interpretation, modeling, and visualization of the data have grown in sophistication supported by some of the world's most powerful computers. In partnership with a visionary group of E&P companies, geophysical contractors have spent millions on research and operational improvements to avoid potential harm to marine mammal life caused by its operations. This work continues to ensure that geophysical surveys meet and exceed any government environmental regulations.
Probably the most significant advance for the long-term development of the world's offshore oil and gas resources is the use of seismic data acquisition for monitoring reservoir performance during production. Imaging from repeat time-lapse 3D seismic surveys over a reservoir, termed 4D seismic, can reveal valuable information for optimizing recovery such as placement of drainage and injection wells. The net result is greatly improved recovery rates from existing oil and gas fields, which most experts acknowledge need to be the source of much of the world's energy supply in the future.
The 4D seismic enhanced oil recovery method is being used extensively in such areas as the North Sea, Gulf of Mexico, West Africa, and offshore Brazil. Most 4D surveys to date have been carried out using conventional towed streamer technology. In some circumstances ocean bottom cable or recoverable node receivers are placed on the seabed. While more expensive than non-exclusive surveys, this technology provides improved data.
The logical extension of 4D seismic is permanent reservoir monitoring, called life of field seismic (LoFS), a technology still in its infancy. In this case, survey instruments are buried in the seabed at the reservoir location, and a seismic source vessel conducts periodic surveys over the area to provide updated images for reservoir management. The first full LoFS project on the BP Valhall field, offshore Norway, was installed in 2003 and more than a dozen monitoring surveys have been carried out. When it was launched, BP said it estimated that the investment of $350 million would help to extend the life of the field, adding some 60 million barrels of oil that would otherwise not be recovered.
Two other examples of the enormous value added from marine geophysical applications include the emergence of electromagnetic (EM) and wide-azimuth seismic surveys. Since it was introduced 10 years ago, offshore EM surveys have in certain conditions been able to detect the presence of hydrocarbons in a way seismic cannot. This has proved exceptionally valuable in de-risking deepwater plays where drilling is extremely costly. ExxonMobil attributes a string of massive deepwater discoveries off West Africa to EM technology.
Meantime wide-azimuth seismic survey techniques, which literally take a wide-angle look thousands of feet below the seabed, have finally cracked the problem of imaging the subsurface below bodies of salt found in the Gulf of Mexico, offshore Brazil, and some other oil provinces around the world. This new method is already opening up the prospect of finding huge new reserves.
In our view, the geophysical community serving the offshore E&P industry deserves to be considered as part of the solution to people's negative views. Over the last 25 years, it has established an unrivalled record in offering technology which has added substantially to the world's oil reserves in a more economic and responsible manner all while reducing risk. Our task must be to broadcast this achievement more effectively outside the confines of our industry. OGFJ
About the author
Chip Gill has served as president of the IAGC since 2001. He began his career as a rig hand for Ard Drilling Co. in 1977. He joined Atlantic Richfield in 1979 asn served in positions in land and government relations. In 1993 he joined Vastar Resources as manager of government relations. In 2000 he joined the International Petroleum Association of America where he served as vice president of membership and strategic planning. He holds a bachelor's degree in petroleum land management from the University of Texas at Austin with an emphasis in geology.
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